Tue. Sep 27th, 2022

A college/university education is expensive and tuitions will only go up with time. An R.E.S.P. (registered education savings plan) is an excellent way to start planning for your child’s future. Consult several institutions before choosing the one right for you. Families have 18 years after your child is born to generate as much of an educational nest egg as possible. The Government will contribute 20%tax free to your contribution. By properly researching this option, your family can start to get an action plan together. With the new year approaching, it would be wise to start a plan if you haven’t already.

Know all of your facts before starting your R.E.S.P.One place to start is by Googling the Canadian Government’s R.E.S.P. web site.

Read up and learn all you can about what you are starting to enter in to. Consult lending companies and other institutions to make sure you are financially able to contribute is the first step in planning for your child’s future. Here are a few things you may want to take into consideration.
















Positive things that support contributing to the future of your child’s education:


  • The government contributes 20% of what you put in.
  • There is not any annual contribution limit.
  • There is a maximum lifetime contribution of $50,000.
  • Lower income families are eligible to receive a higher contribution from the Government.
  • Once your child qualifies for a part time or full time education program, family members are allowed to contribute to the fund (Christmas and Birthdays are perfect for this occasion).
  • The fund does not have to be collapsed until the 26th year of maturity. This gives your child extra time to get into the program they want. Should your child not be using this R.E.S.P. you may want to consider this nest egg to be used for yourself and transfer the funds to your retirement plan. Keep in mind that the Government contribution of 20% will be withdrawn and you will be paying the taxes on any amount the fund has made in the interim.


In order to make sure you have made the correct decision, here are a few things to consider:


  • The RESP contributions are not tax deductible.
  • If your child does not attend any post secondary school you need to be aware of the taxes and rules that apply when withdrawing or closing the account.
  • If you are not financially stable, it is recommended that you do not start up an R.E.S.P. due to withdraw fees, admin fees and the potential cost of withdrawing earlier than it’s maturity day.
  • You have already paid taxes on the amounts you have contributed. If the R.E.S.P. grows, the difference between what you put in and the 20% the Government adds will be taxed upon redemption. Note if the student is the one withdrawing from the fund the taxable difference is taxed at the student’s rate. If the fund will not be used, you are responsible for paying the taxes on any growth amount.

By rahul