Registered education savings plans from Heritage Education Plans are one way of ensuring that your child will be able to go to college when the time comes. But there is a lot of misinformation about this type of savings plan, so today’s discussion will focus on correcting those misconceptions.
How much will the Canadian government contribute? Who can open an account? These are just some of the questions that we will answer in today’s discussion.
1. The Canadian government sponsors part of the contributions held toward an RESP. This educational grant is operational for more than thirty years, after which the government can request for the reversal of its contributions to a beneficiary’s educational savings plan
2. Anyone, not just parents, can open an education savings plan for a child/beneficiary. The person who opens the account is called the subscriber and the person who will receive payments from the financial institution is called the beneficiary.
3. Educational assistance payments or EAPs can be withdrawn as early as secondary school, if the subscriber starts early. So if you have a small child now, now would be a good time to start contributing to your child’s educational plan.
4. More than one person can make contributions to an RESP. If someone else wants to pitch in, then there shouldn’t be any problems with that.
5. The Canadian government will only sponsor a portion of the contributions for a savings account, up to $7,200. The maximum contribution that can be made for a single beneficiary is $50,000. Even if the beneficiary has several RESPs spread over different financial institutions, the ceiling remains. Only $50,000 can be invested in this instrument.
6. In some provinces in Canada, the provincial government may also sponsor individual/family/group savings plans. The government also uses grants or bonds when the beneficiary is a child or a person under the age of seventeen.
7. There are set monthly or yearly contributions, based on the policy that you acquire when you sign up for an RESP.
8. There are two main options for getting an Heritage RESP for your child. First are financial institutions like banks, investment groups, and the like. The second one is scholarship fund dealers.
Insurance companies generally offer educational plans for kids, and if the company is Canada, contributions from the Canadian grant for education after secondary school will be credited to your child’s account as well.
9. Contributions made to an educational saving’s plan will not be taxed. However, the amount that is made afterward is not tax-deductible. Students are usually able to withdraw their payments without being taxed as they are unemployed in the first place.
10. An RESP can remain valid for up to 36 years after the year of opening. After this period, the government can pull back any contributions.
To qualify for the payments, the beneficiary must study in university or any approved post-secondary school training program. The money can be withdrawn for any reason, but the money becomes subject to income tax plus a penalty of 20% from the Canadian government.