If you’re interested in setting up a savings plan specifically geared towards paying for your child’s secondary education some day, a Registered Education Savings Plan, or heritage RESP, is an excellent option. The way the plan works is very simple because you simply donate to the fund over time and use the money when your child goes to college. There are also certain tax benefits to having a RESP; below are a few things for you to consider if you’re thinking about setting one up.
1. Family Plans Are Available
A RESP can be set up by anyone for the benefit of a child and you are also allowed to open up family accounts that take care of more than one child. You can also contribute to a group heritage RESP but these are not always recommended because they are a bit confusing. Regardless of the plan you choose, however, it is recommended that you ask a lot of questions so there are no misunderstandings when it comes time to use your money.
2. The Government Will Match the Funds
The government of Canada matches up to 20% of the money you put in there yourself, which enables your account to grow even faster. There is a total annual limit that they will donate but it is still good to know that you automatically get additional funds placed in your account every year. It’s just an extra incentive to set up one of these plans.
3. You Can Sometimes Get Additional Help
Through the Canada Education Savings Grant, or CESG, if you don’t make much money, you may be eligible for an even higher contribution from the government. This depends on your income, of course, but you can enhance your Registered Education Savings Plan by checking into this option with the experts before opening your account.
4. Funds Are Immediately Available When They Start School
As soon as your child starts school either part-time or full-time, you can start withdrawing the funds you need. Since you’re taxed on the money before you get to this point, you will not be taxed on the money you’re withdrawing. There are also certain rules regarding the maximum limit that you can withdraw and what happens to the money if your child decides not to attend college but those should be explained to you in the very beginning.
5. You Can Withdraw the Money at Other Times
The companies that help you set up a RESP realize that you may need access to those funds in the years before your child attends college and you are certainly able to do that. However, you’ll need to replace those funds eventually because, in the end, this is an account that is meant to pay for college and nothing else.
Saving for your child’s college education is much simpler if you start early and the heritage education funds RESP accounts are the perfect way to do that. All you have to do is speak with an expert and all of the important rules and regulations will be explained to you.