RESP and Its Types

 

What is RESP?

Registered Education Savings Plan (RESP) is a savings plan that is designed to help Canadian families save for their children's post-secondary education. The program is available to all Canadian residents and is supported by the Canadian government through the Canada Education Savings Grant (CESG) and the Canada Learning Bond (CLB). RESP is a great way to save for your child's education, and it offers many benefits to Canadian families.

How does RESP work?

RESP works by allowing parents or guardians to contribute to a savings plan for their child's future education. The government also contributes to the plan through the CESG and CLB programs. Contributions to RESP are tax-free, and the government provides grants based on the amount of money contributed. The maximum amount of money that can be contributed to an RESP is $50,000, and the government provides a maximum grant of $7,200 per child. RESP can be used to pay for tuition, books, room and board, and other related expenses.

The money invested in RESP in Calgary grows tax-free until it is withdrawn for education purposes. The money can be invested in various options such as mutual funds, GICs, and savings accounts. The investment earnings are also tax-free when they are used for education purposes. The government also provides additional incentives to low-income families through the CLB program.

There are two types of RESP: Individual and Family. An individual RESP is designed for one child, and a family RESP is designed for multiple children. An individual RESP can have one or more contributors, such as parents, grandparents, or other family members, but only one child can be named as the beneficiary. A family RESP can have multiple beneficiaries, and the contributions can be shared among the beneficiaries.

Another type of RESP is the group plan, which is marketed as a scholarship plan. This plan is designed for families who want to pool their savings together to receive a guaranteed return on their investment. However, group plans have been criticized for their high fees and limited flexibility.

Benefits of RESP

RESP offers many benefits to Canadian families. Here are some of the benefits:

Tax-free growth: The money invested in RESP grows tax-free until it is withdrawn for education purposes.

Government grants: The government provides grants through the CESG and CLB programs, which can add up to thousands of dollars in savings.

Flexibility: RESP offers flexibility in terms of investment options and the number of contributors and beneficiaries.

Low-risk investment: RESP is a low-risk investment option, making it an excellent choice for families who want to save for their child's education.

Savings for post-secondary education: RESP is designed to help Canadian families save for their child's post-secondary education, making it a crucial tool for families who want to ensure their child's future success.

In conclusion, RESP is a fantastic way for Canadian families to save for their child's post-secondary education. It offers many benefits, such as tax-free growth, government grants, flexibility, low-risk investment, and savings for post-secondary education. There are two types of RESP: Individual and Family, and families can choose from various investment options to grow their savings. RESP is an essential tool for Canadian families who want to ensure their child's future success.