RESPs (Registered Education Savings Plans) are a great tool to help families save for their child’s education. With the escalating costs of post-secondary education, starting a RESP account for your children as soon will definitely help offset these expenses.
The HUGE advantage of starting such an account is the Education Savings Grant money which the government will match to your contributions to such a plan. (which can be up to $500 per child).
- College and University are more important than ever before. Two out every three new jobs require some form of post-secondary education.
- According to the 2006 Census, Canadians with a university degree earned an average annual salary of $56,048 compared to $37,403 for Canadians with a high school diploma.
- The cost of a post-secondary education keeps growing. In 2009/2010, the average annual undergraduate university tuition for a full-time student was $4,917 compared to $3,328 in 1999/2000 and $1,185 in 1988/1989.
- Between March 2008 and March 2017, 1,574,200 new jobs were created for university graduates – almost three times those created for graduates of all other types of post-secondary education combined. Source: Statistics Canada, Labour Force Survey, 2008-2017
- 80% of Canada's top 25 jobs of 2016 required a university degree. Source: Universities Canada, Back to School Quick Facts, August 2016.
- 71% of all new jobs created by 2022 will require a post-secondary education, or will be in management. Source: Council of Ontario Universities, Where The Jobs Are (September 9, 2015)
- To see where Future Job Opportunities exist and the value of university degrees click here
- But tuition and related fees are not the whole story. They represent just one third of the expenses that students face each year. Add in accommodation, food, transportation, books, computers, and leisure, and the cost increases substantially.
- For more detailed RESP information (including info on what happens if my child does not go to post secondary education)...click here
- The life time maximum that can be invested per child is $50,000. There is no annual limit up to this amount.
- The maximum grant money that is available per child, per year is $500. The government matches 20% of your contribution to a maximum of $500. So for example, a $2,500 contribution would entitle you to receive $500 of grant money. In some cases if you are late in beginning a RESP plan for your child, you could get up to $1000 in grant money by taking advantage of carry forward room which would accumulate from year 1998. (Call me to find out more!)
- Additional grants are available to lower income families who are looking to establish a RESP account for their child/children. To determine if you are eligible to receive an additional 10-20% grants (over and beyond the basic 20% government grant) please click here.
- The CLB (Canada Learning Bond) is an additional grant issued by the government to modest income families...It provides an upfront $500 payment per child (with a lifetime maximum amount of $2,000). To determine if you qualify for the CLB payment, please click here.
- Your contributions to the plan are not tax-deductible but the interest, dividends and capital gains compound and grow tax-free in the plan until money is withdrawn.
- When money is taken out from a RESP to pay for educational costs (i.e. Tuition, books, parking, etc.) the grant money and growth on the investments is taxed in the hands of the child/beneficiary. The initial principal invested (typically by the parents) is returned to the parents tax-free.
- ‘Family RESPs’ allow you to have one plan for 2 or more children. The advantage of doing this is that if one child decides not to pursue a post secondary education, the other child could use ALL the money inside the RESP plan for their own use.
- If none of the children go to post secondary education, then the person who made the initial RESP contribution would get back their principal tax-free. The growth/earnings on the investments can be taken in cash, with certain conditions, or transferred tax-free into their RRSP, if they have available contribution room. The grant monies received over the years is paid back to the government.
- HRDC will only pay grant money up to the calendar year of the beneficiary’s 17th birthday. For beneficiaries aged 15 to 17, special rules apply. In order to continue receiving the Canada Education Savings Grant after age 15, certain contributions must have been made to the RESP (and not withdrawn) by December 31 of the calendar year in which your child turns 15:
- RESP monies can be used for ANY recognized institution within Canada, and outside of Canada as determined by HRDC. Click here to link to ALL eligible schools for which RESP money can be used for as determined by HRDC.
- RESP accounts can remain open for up to 36 years
- Limit on EAPs (Educational Assistance Payments)
For RESPs entered into after 1998, the maximum amount of EAPs (grant & growth) that can be made to a student as soon as he or she qualifies to receive them is: - for studies in a qualifying educational program - $5,000, for the first 13 consecutive weeks in such a program. After the student has completed the 13 consecutive weeks, there is no limit on the amount of EAPs that can be paid if the student continues to qualify to receive them. If there is a 12-month period in which the student is not enrolled in a qualifying educational program for 13 consecutive weeks, the $5,000 maximum applies again.
1. There have been contributions to the RESP of at least $100 per year
in any 4 years
OR
2. Previous total contributions of at least $2,000.
