Education Planning- RESPs

Registered Education Savings Plans are smart way to save funds for your child’s post secondary education. The funds for child’s RESP can be contributed any any one including parents, grant parents etc. Government will contribute 20% of the deposit you make every year to a maximum of $500 per year until the child attains 17 years of age.

You may be eligible Canada Education Savings Grant of another 20% based on the family net income for each year.

You may be also eligible for Canada Learning bond of $500 when you open an RESP account.

Withdrawals for education payments are subject to certain rules:

For studies in a qualifying educational program, an amount of $5,000 if the education program lasts atleast13 consecutive weeks in such a program. After the student has completed the 13 consecutive weeks, there is no limit on the amount of EAPs that can be paid if the student continues to qualify to receive them. If there is a 12-month period in which the student is not enrolled in a qualifying educational program for 13 consecutive weeks, the $5,000 maximum applies again.

What kind of RESPS are eligible for your child?

There are 2 types of RESPS available.

1) RESP opened directly through banks and other financial institutions

These plans can be easily withdrawn early, does not have entry fees, can be moved from one financial institution to another, can change the asset mix (like stocks, bonds or mixture of them)

2) Scholarship Plans

These plans are kind of locked in plans where you cannot withdraw early, locked in for the entire 18 year duration of plan, have significant entry fees where the funds are removed from your initial contribution, you cannot change the asset mix. However these plans offer some sweetened deals for example by providing another 15% contribution to you plan provided you meet certain conditions.

Talk to your Tax Accountant before you sign up for an RESP plan so that your objectives are matched to the plan.


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