If you are a parent, you are probably familiar with Registered Education Savings Plans. You might have heard your friends mention them or might have seen some brochures from your bank. This is definitely something you should look into since this is one of the most affordable ways to save up for your child’s education.
You can open one of these savings plans with your bank since most financial institutions as Heritage RESP offer them. You can open a savings plan as soon as your child is born. In fact, it is best to open one as early as possible so you have more time to save up to finance your child’s education.
Opening a Registered Education Savings Plans (RESP) means you enter a contract. You will agree to make regular contributions to the plan. There are no annual limits to how much you can contribute but you cannot contribute more than a total of $50,000 to a plan. You will also have to name your child as the beneficiary of the plan.
Once you enter this contract, the beneficiary of the plan will become eligible for government grants that will be deposited in the savings plan. Depending on your income and situation, your child might be eligible to receive the Canada Education Savings Grant or Canada Learning Bonds. Depending on the province where you live, your child might be eligible for additional grants offered by your province. Your financial institution will help you determine which grants your child is eligible for and how to apply for them.
The main advantage of using these plans to save up for college is that your child will receive a number of grants over the years. The money that comes out of the plan to finance your child’s education will also more than likely not be subject to taxes. Because your child is the beneficiary of the plan, the money that comes out of the plan is considered as your child’s income. This amount should be below the threshold to file for taxes and if the annual amount that comes out of the plan is high enough for your child to have to pay taxes, the tax rate should be fairly low.
Registered Education Savings Plans are the best way to save up to send your child to college. You should contact your financial institution to find out more about these plans and about the grants your child would qualify for.