Planning You Child’s Post Secondary Education with RESP
Not every parent in North American can make their children take post secondary education because it is very expensive. Not all kids go to college, but if they want to go you should have been prepared beforehand, otherwise it will be a great financial burden to you. This will only happen if the family has some financial security of some sort.
Parents with children who want to enter college can benefit from the Registered Education Savings Plan or RESP. This is a government sponsored savings plan which is allowed to grow tax-free. When the plan money matures, it is considered income for the student and can be taxed.
Private companies or individuals are the plan administrators and they can invest the money that they collect from the plan. Every year, the contributions can reach up to $4,000 per student beneficiary with a lifetime limit of $42,000 without any tax implications. Students sometimes get more than one plan but the limit is strictly per student.
One benefit of RESP is that the government will add 20% to the first $2,000 per calendar year or $400 up until and including when the student reaches his 17th birthday. The additional money given by the government is called the Canada Education Savings Grant or CESG, and this amount in not included in the annual limit for tax purposes.
A student can receive from CESG a maximum of over $7,200 over the lifetime of the plan. You can claim $800 of amounts not previously claimed from the CESG. RESP that is not eventually used for educational purposes will require that the contribution given by the CESG be returned to the government.
The RESP is for Canada residents who have a Social Insurance Number (SIN). The SIN of both the student and the one providing the contributions must be provided to the promoter at the inception of the plan.
RESP plans comes in three types and they are discussed below.
In the non-family plan, anyone can make a contribution and there are no limits to the amount but only one student can benefit from it.
In the family plan, only family members can make contributions to the plan which can benefit one or more students. There are no restrictions as to when and how much is paid.
The group plans have requirements of the amount that is paid and when it should be paid and are usually offered by foundations. Each age group will have a particular plan and all members will take a share. Before deciding on the group plan, there should be adequate research done with the plan providers because the rules to this plan are quite complicated.
Source: http://financewand.com/how-should-i-finance-my-childs-education/