When we think about education, we think about the high costs of post-secondary education. Today, tuition fees for students who attend full-time post-secondary institutions are typically between $ 2,500 and $ 8,000 per year, if not more. This is too high for a medium income family. To this amount are added books, school supplies, fees, transportation, accommodation and related expenses. With a growth rate higher than inflation, it is not surprising that the costs of studying become a source of debt for young people. It is true that studies can be very expensive, but they remain an excellent investment.
A recent Canadian census revealed that more than 60% of the people with the highest income had a post-secondary diploma. To help parents finance their children’s education and avoid debt, the Registered Education Savings Plan (RESP) is an effective way to help.
What is RESP?
The RESP is a special savings product registered with the Government of Canada, which allows the subscriber (the person who establishes an RESP contract with a supplier and designates a beneficiary on whose behalf it will make contributions) to save Beneficiary of the plan can pay for the costs of his / her post-secondary education. Amounts deposited in the RESP accumulate and generate tax-sheltered income until the beneficiary enters a post-secondary education and the subscriber can apply for withdrawal on behalf of the beneficiary so that the beneficiary May pay the costs of schooling. One of the main benefits of the RESP is the incentives paid by governments: Of Canada: Basic and Additional Canada Education Savings Grant (CESG). Knowledge First Financial is one of the company that grants RESP.
To qualify for these incentives, you must open an RESP and provide the Social Insurance Number (SIN) of the subscriber and the designated beneficiary. Before proceeding, it is important to get information from the various suppliers about the types of plans offered and their respective conditions, so as to choose the one that best meets the needs:
- The individual RESP: where there is a single subscriber (or two subscribers with a relationship as spouses) and a single beneficiary who is not required to be related to the subscriber. Since no age limit is imposed, a subscriber may be the beneficiary of his own plan.
- The family RESP: where a subscriber (or two spouses) can appoint multiple beneficiaries, provided that they are all related to them by blood or adoption and are under 21 years of age.
- The collective RESP: where a set of individual plans are pooled (collective trust) and administered by various age groups. As a result, it is a less flexible regime for both investment choice and disbursement, since sums could not be recovered if the beneficiary did not pursue post-secondary education. Making money work
Once the RESP is opened, the subscriber can make contributions and invest the money in various investment options. In an individual or family RESP, the policyholder decides when to contribute and has no restrictions on the choice of investments.