If you are a parent, your child’s future is undoubtedly one of the most important things that are always on your mind. Seeing that your children eventually turn out to be very successful would definitely give a great sense of satisfaction that you have done your very best as a parent in helping them achieve their dreams through good education. While this can come at a cost, the best way for you to achieve this is to have a plan ready, one of which is opening a Registered Education Savings Plan (RESP). What is an RESP and how is this a smart move in securing your child’s future? Let us explain.
What’s an RESP?
As the name already suggests, it is a government registered savings plan designed to help Canadians to save with the purpose of paying for their child’s post-secondary education. So whether you want to go to college, university or trade school, the RESP scheme can help make your wish for your children a reality. But how can this be? To avoid missing out, read on to see how an RESP can secure the future of your dear child.
How RESP secures your child’s future
Maximize your RESP contribution
With the RESP program, parents can increase their contributions towards their children’s RESP, which is up to a threshold of $50,000 for each child and take advantage of free money, a generous grant from the Federal Government without changing your budget. This indeed makes RESP an amazing way to save up and secure quality education for your child. But you may be wondering, how does RESP work?
It is very simple! In addition to the contributions you make into your child’s RESP, you’ll receive government grants. The more you contribute to an RESP, the higher the grants received, up to a yearly maximum. The total accumulated amount of your contributions, combined with the grants will not only secure the child’s future but also grow the RESP tax-free as long as it stays within the plan.
More savings equals more grants for your child
The unique thing about RESP is that you get an extra $500 per year via the Canada Education Savings Grant (CESG) for a total of up to $7,200 until your child who is eligible turns 17.
Now you see why it makes sense to grab these generous grants offered by the government not only to save up but to guarantee a secured future for your kids. To that end, it is prudent that parents start saving in their children’s RESP early enough, so that by the time they are ready to start post-secondary education, your children will be more focused on their career, without getting apprehensive about the finances.
Easy and early funds withdrawals
Your child is now of age and is ready to start post-secondary education. What happens next? You can now withdraw the principal contribution that you deposited into your child’s RESP. Easy right? For the sake of argument, let’s say your child decides not to pursue higher education, what happens next?
Well, the interesting thing is that you’ll still receive more money, as you are qualified to withdraw the accumulated interest in the RESP. This is known as Accumulated Income Payment (AIP) which was generated from your contributions, and the government grants.
From the foregoing, an RESP, if used wisely, is a great way to consider when planning the education of your child you wish to see successful in the future. To take the right decision, you may want to check out Heritage RESP reviews.