Education Saving Plan
At Nanak Insurance, we recognize the importance of investing in education and securing a bright future for your children. One of the most effective ways to save for their post-secondary education is through a Registered Education Saving Plan (RESP).
A Registered Education Saving Plan (RESP) is a government-approved investment account designed to help Canadians save for their children’s education. It provides individuals with an opportunity to contribute funds that grow tax-free until the beneficiary enrolls in a qualifying post-secondary program.
The Canadian government offers two primary grant programs to encourage RESP contributions: the Canada Education Savings Grant (CESG) and the Canada Learning Bond (CLB). These grants provide additional funds that can significantly boost your savings and help make education more affordable.
Why Go For Registered Education Saving Plan (RESP)?
There are other registered investment accounts that you can go for if you want to save for the future, but RESP offers some additional benefits that no other saving account gives.
Benefits offered by RESP are:
- Tax-sheltered growth
- Government grants (CESG and CLB)
- Flexibility in beneficiary designation
- Education Assistance Payments (EAPs)
- Lower taxes on withdrawals
- Compound growth potential
- Investment options
- Transferable between beneficiaries
- Lifetime contribution limit
There are some points that you need to take care of if you invest in RESP and they:
- If the contribution made in RESP is not spent on recipient’s post-secondary education till the account completes 36 years then the grant given will be retrieved by the government.
- You have to pay a penalty on the RESP amount that you use for other purposes than child’s education. The penalty will be equivalent to 20% of the amount left in the RESP account.
Why Go For Registered Education Saving Plan (RESP)?
- Individual RESP allows saving for education for one child only and it is not necessary that the contributor is related by blood with the recipient. Contributions can be made by only a single person.
- Family RESP allows saving for more than one recipient but only by a single contributor. This type of account can be opened for children who are part of the same family and are related by blood with the contributor.
- Group RESP allows one or more contributors who want to save for the education of the same child. Having blood relation with the recipients is not compulsory.
Irrespective of the type of RESP account, the Canadian government makes contributions in RESP accounts. Depending upon the types of grants, the federal or provincial government takes responsibility for the RESP grant.
