Introduction to the Canadian RESP Account
The Registered Education savings Plan (RESP) account is an investment vehicle that is designed for college planning. Parents, grandparents and other family members often desire to financially contribute to a child’s future higher education costs. As Canadians desire to plan financially for their children’s high education costs, the RESP account is a popular investment tool to utilize for the purpose.
The RESP account offers individuals several tax benefits when they utilize the account for higher education purposes. The primary tax benefits include tax free growth and tax free withdrawal when the funds are utilized for qualified higher education expenses. There are several important regulations to become familiar with for the RESP account:
- Contribution Amounts- The maximum total contribution per child into the RESP account is $50,000. There is not currently an annual maximum contribution limit, although when they account was initially created, there were annual contribution restrictions to adhere to.
- Account Beneficiaries- The account must be registered with a beneficiary. This beneficiary must be a child with a registered social insurance number. Each child may have more than one account established, allowing multiple family members to create accounts to aid in the future higher education costs.
- Age Restrictions- The beneficiary listed can access the funds for higher education purposes at any age. But, the funds must either be utilized or the account must be dissolved before the beneficiary reaches the age of 25.
Contributions into the RESP account are not tax deductible. But, the tax free growth allows the funds to grow more quickly than they would if they were in a taxable investment account.
For individuals who are looking to establish a RESP account, there are a variety of financial institutions that they can establish this account with. Some of options for establishing a RESP account include banks, credit unions, mutual fund companies, investment houses and trust companies. Each type of financial institution will offer a variety of investments to use within their RESP accounts. So, when selecting a financial institution, be sure to evaluate which accounts are the best match for your financial goals and needs.
Most financial institutions will offer a variety of investments to select from within their RESP accounts, including securities, bonds, mutual funds and cash. So, account holders have the option to develop an investment diversification that matches their risk tolerance and their investment time frames.
Canadians need to save for many different purposes over their lifetimes. In addition to RESP accounts reducing taxes on savings can also help. That’s why the Government has introduced a new Tax-Free Savings Account (TFSA). It’s likely the single most important personal savings vehicle since the introduction of the Registered Retirement Savings Plan (RRSP).
The TFSA will allow Canadians to set money aside in eligible investment vehicles and watch those savings grow tax-free throughout their lifetimes. TFSA savings can be used to purchase a new car, renovate a house, start a small business or take a family vacation. With the TFSA Canadians from all income levels and all walks of life can benefit.
Download your Free Special Independent Review of the TFSA at: http://TaxFreeSavingsAccountInfo.com/
Registered Education Savings Plan FAQ:
Question: Why can’t they make Registered Education savings plans tax free?
Answer: RESPs ARE in a sense tax-free in that once you contribute to one for your child it grows tax-free. Growth and grant when removed from the plan to pay education-related expenses are taxed in the hands of the student. Typically, students have little or no income at the time and will pay little or no tax. What you as the contributor are NOT getting is a deduction against income on your tax return as you do on Registered Retirement Savings Plan (RSP).
Now, if your question is why is that? Well, simply put the government has calculated that it will cost a considerable amount of money in lost revenue if they do that. In addition, they are already offering a good incentive by providing the Canada Education Savings Grant otherwise known as free money from the government by contributing to RESPs.
Question: Which RESP fund company (bank) to choose in Canada?
We are to invest in the RESP (registered education savings plan) for our baby. We have been approached by a sales person of Heritage education funds, Canada. Anybody to comment on this company? Also, what were your choices in selecting the institution to work with in RESP and why?
Answer: I’d go with an institution in which you can select your own investment funds from brand name fund managers (ie: Fidelity, Templeton, McLead Budden) rather than Heritage Education Funds investing it for you.
Question: Should I worry about having enough money for university?
I’m a 16-year-old girl. I’ve had several jobs starting from when I was 8 years old, and I’ve saved all the money I’ve earned over the years. My parents have put all this money into Canada Savings Bonds, mutual funds, and GICs. Right now I have about $15 000 saved up. Whenever the total money in my bank account reaches $500, I invest it somewhere else because my bank account doesn’t have a high interest rate. My parents have also started contributing to an RESP (registered education savings plan) in my name and so far there’s about $10 000 in it. Should I worry about having enough money for university, and what should I do about it? I really don’t want to have to get a loan.
Answer: I think you are doing just fine. You sound extremely smart! If you started working when you were 8 years old, you must really want this. I definitely think that you will earn enough money. Since you are only 16, you still have some time left. I wish the best of luck to you! Another option you may want to consider is the military as your entrance into the world of medicine. They might pay for everything if you agree to serve for 5 years as a doctor.
Question: Is this a scam, Canada education plan?
Is it normal for someone to visit your home from canada registered savings plan? I just had a baby (1 month )and already have one (3 yrs), I didn’t get around to saving up yet for them. I recieved a phone call from someone saying they were from canada registered savings plan but she wants to come to MY home and give me a 20 min presentation and this can’t be done over the phone. I’ve tried looking online and can’t really find anything related to this.
Answer: Well, yes, this did happen to me and I did start an RESP for my daughters post secondary education.
Question: My father want his RESP money back, even though I’m not living with him anymore.
I changed the address with the RESP company, he called and changed it back. I wondered why I didn’t get the cheque, so I called them and the address had been changed back, and they resent me the check. Since the money is in my name and I pay taxes on it, I have been keeping the money, but he is becoming more and more persistent to get it, even though it is in my name, and I am not allowed to give it to him for tax reasons, and that it is part of the contract.
How can I get him to stop harassing me? I called the company, and they have clearly stated he can not get the money, yet all he does is yell and raise his voice. He is stubborn and will not listen.
Answer: No one can harass you or give you a hard time unless you let them. It was his decision to save the money for you, he signed the contract, so he must know that the money can not go back to him. Remind him of this. Can your mom reason with him?