It's almost the end of the year, lets make some money! (RESP's)

Okay or at least, lets make some money to help send our little ones to school

Did you know you can get a good chuck of change from the Government for your children's education fund.  Here is a little blog on how!


How to get the most out of your Registered Education Savings Plan (RESP)

There are two great reasons to save for a child’s post secondary education by using an individual or family RESP.

Government Grants help increase the funds available in the RESP to invest for the future, and Grants do not count towards the $50,000 life time contribution limit per child.

You can decide how the money is invested and the growth on this investment is tax deferred. Any taxes upon withdrawal are paid by the beneficiary.  This lessons any taxes, as they are based on the students income, which will generally be lower than the contributors

What do you need to know to get the most out of your RESPs?

Your child will need a Social Insurance Number. The great news is that this can be applied for at the same time as their Ontario Health Insurance Plan.

Start right away. Even if you cannot contribute much today, additional grants, beyond the Canadian Education Savings Grant (CESG), are based on your income. Most people are making less now than they will in the future, therefore, more Grant money is available to them today than when they are in a higher tax bracket.

Build a contribution plan. Work with an advisor to help develop a plan that works with your retirement planning and debt management to maximize grants in the early years. This will give your money more time to grow in a tax deferred environment.

Consider a Family RESP, even if you have only one child now. If you have more children in the future and one child does not go to school Grants can be used by the other siblings, up to the maximum per child of $7,200.

Think it is too late to start an RESP?  It probably is not. 

As long as an RESP was started before the end of the year in which your child turns 15 and meets certain minimum contribution requirements they are still eligible for Grants until the end of the year in which they turn 17.

Even if contributions are not eligible for Grants the money you set aside can continue to grow in a tax deferred environment until the year your child turns 31 (this deadline is extended for children who are eligible for the Disability Tax Credit)

To put this into perspective;

If you contribute the amount of $2,500 annually you will get the yearly maximum (CESG) of $500. Because you used an RESP your child would have approximately $62 500 available for their education versus only $52,000 (if invested with a modest return of 4%). That is over $10,000 of free money from the government!

These are just some of the important points. For more information please do not hesitate to e-mail or call for further information or to learn how RESPs can fit into your financial plan.

Kaila Burnatowski

Sun Life Financial Advisor