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RESP (Registered Education Savings Plan)

The RESP (Registered Education Savings Plan) is a method of saving for post-secondary education. The Canadian Federal Government gives the advantage of tax sheltered growth of income in the RESP until it is used by a Qualified Student when s/he is usually in a low tax bracket. Students who typically have little or no income can also use offsetting deductions which include a personal tax exemption, tuition fees deduction, and a deduction based on the length of their studies. The other major advantage of a RESP is that a certain amount of contributions to a Plan are eligible for the Canada Education Savings Grant (CESG). The CESG is available for up to $7,200 from the government for each child and this combined with the resulting compounded tax sheltered income while in the RESP can total to over a $15,000 boost from this source. Almost all financial advisors and other authorities involved with financial planning recommend that a family invest for post-secondary education through RESPs

CESG - Canada Education Savings grant

In 1998 the Federal Government introduced the Canada Education Savings Grant. Families, who invested in RESPs for education, were eligible to get 20% added to their yearly contributions. From 2007 the amount of yearly contributions, eligible for 20% addition, hfs been inrcreased from $2,000 to $2,500. The CESG maximum is $7,200 per child through the life of the plan. A feature that is not very well known by "would be" RESP contributors is "Carry Forward Room". If a child was living in Canada he began to accumulate contribution room whether or not he had a RESP. This means that unused grant for each year is potentially $400 for $2,000 (from 2007 - $2,500) contribution and can be used in future years. The maximum CESG that can be received in one year from 2007 is $1,000 because of the $5,000 contribution limit. Parents with children of age 15 and a few years younger should especially maximize on this feature by maximizing their RESP contributions. RESPs in existence for children at ages 16 and 17, require certain conditions to be met in order to receive the CESG for their RESP. The government conditions are: that in the year that a child turns 16 or at any time before, RESP for the child must have either contain a minimum of $2,000 (and not withdrawn) or $100 invested in any 4 years (and not withdrawn).

Highlights: Government grants up to $9200 (including Canada Learning Bond).

For further information please visit the following government websites.

www.cra-arc.gc.ca/tx/ndvdls/tpcs/resp-reee/menu-eng.html

www.esdc.gc.ca/en/resp/info.page
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