There is much to be said for and against RESP schemes, but if you are smart about your savings then you can do better than most with RESPs. Here are a few things that can help you.
- Every year you can get a grant of $500 towards your child’s educational savings under the Canada Education Savings Grant. That is quite a bit of free money. This grant will continue until your child turns 17 or the accumulated grant equals $7200, whichever is earlier.
- You can only collect the grant amount if you make a contribution of $2500 per year on your part. So, on the year that your contribution falls short of that amount, you won’t receive the CESG. So, in order to collect the full $7200 you should start the fund as early as you can, preferably right after the child is born. And whenever you get some work bonus or extra money, put it in the account right away.
- As long as the money is in the RESP account you don’t need to pay any tax on either the grant, the contribution you make or the interest you earn. This is a great feature as the whole amount will go towards your child’s education and associated fees.
- The savings limit for an RESP like Knowledge First Financial is $50,000. If you can save this amount then you will get the maximum benefit from the tax free income as well as the growth on the investment.
- A RESP such as Knowledge First Financial for a child’s education can be started by grandparents, uncles, aunts and even the friends of the parents. This is a very good feature of the plan and if you can take advantage of it then you can save money for your child’s education efficiently.
- A RESP can be kept open for up to 35 years. This is very helpful for people who take a hiatus of a year or two in the middle of their studies or want to do further studies later in their life. The money can be withdrawn in this period anytime without any penalties.