With the costs of education continually rising, it can be a challenge for parents and other benefactors to pay for the cost of post-secondary education, specifically of a college degree program. Thankfully, there are many options for funding currently available, with one of the most useful being the Registered Education Savings Plan or RESP. With a Registered Education Savings Plan in Canada, the cost of post-secondary education can be managed more easily, and families can be better prepared for college in the future.
RESPs provide numerous benefits to parents and benefactors of college-age children and even adults, including tax-deferred contributions, government grants and financial assistance, access to government instituted programs, and investment growth opportunities.
Subscribers–those who sign up for the plan and contribute to the fund–may assign any number of beneficiaries. These are the people who will actually use the funds to help pay for college education.
Most beneficiaries are children of subscribers, although subscribers may also designate other children as beneficiaries, including nieces, nephews, other relatives, children of family friends, and even other adults and themselves. The only requirements for being a beneficiary are Canadian residency and a social insurance number from the Service Canada Centre office in their province.
Parents and other benefactors may sign up for an RESP with the help of an RESP advisor, or directly through any one of the many RESP providers in Canada. Plans may remain open for up to 36 years for family plans, and up to 40 years for specified plans, after which time the funds will have to be withdrawn or transferred to another beneficiary.
During his lifetime, subscribers are allowed to make as much as $50,000 in total contributions for a single beneficiary. Although contributions made to the RESP cannot be deducted against the subscriber’s taxable income, all earnings from investment in the program are subject to tax deferral as long as the funds remain in the RESP account.