Registered Education Savings Plan (RESP)
A Registered Education Savings Plan (RESP) is a special savings account for parents who want to save for their child's education after high school. RESP is a wonderful way to help you save for the post-secondary education of your children. The funds invested/accumulated through RESP can be used to pay tuition fee and other financial barriers of post-secondary education including residence, school supplies, food, and travel. Like RRSP, the funds invested in RESP grow in a tax-sheltered manner until the time you withdraw the money to cover educational expenses.
The promoter usually pays the contributions, and the income earned on those contributions, to the beneficiaries. The income earned is paid as educational assistance payments (EAPs). Beneficiaries generally receive the contributions and the EAPs from the promoter. They have to include the EAPs in their income for the year in which they receive them. However, they do not have to include the contributions they receive in their income.
How much money can you save?
The maximum lifetime contribution limit per child is $50,000 while there isn’t any annual contribution limit. This implies that as per your budget, you can invest up to $50,000 in the plan.
To encourage parents to invest funds in post-secondary education of their children as early as possible, the government of Canada has devised CESG plan. The subscriber makes contributions to the RESP. Government grants (if applicable) will be paid to the RESP. These grants can be the Canada Education Savings Grant (CESG), Canada Learning Bond (CLB), or any designated provincial education savings program.
British Columbia Training and Education Savings Grant (BCTESG)
Families in British Columbia are encouraged to start planning and saving early for their children’s post-secondary education or training programs. To help, the B.C. Government will contribute $1,200 to eligible children through the B.C. Training and Education Savings Grant (BCTESG). Eligiblity Creteria for the $1,200 BCTESG:
- Parent and child must be residents of B.C.
- Child must have been born in 2006 or later.
- Child must be named as a beneficiary of a RESP with a participating financial institution.
- The parents can apply BCTESG for their child after the child turns six but before the child turns nine.