It is very wise of you to invest in your children’s post-secondary Education Savings Plan. Canadian citizens have a fantastic advantage when it comes to educational policies. The Registered Education saving schemes assists you to plan for your child’s education. You have various options when applying for RESP. You can choose to join the arrangement as an individual or as a group. Anyone opting for group membership can go for the Group Scholarship Heritage Education Funds RESPs.
Members of the scheme subscribe by contributing some amount of money. The government provides some amount of money towards the project as well. The contributions made by the government apply only to children under the age of 18.
The primary aspect that characterizes RESP is the tax benefits it offers. The scheme provides the subscriber’s tax shelter which is very helpful. Tax only applies to the principal investment that is taxed at the contributor’s tax rate. The other charges take place upon withdrawal at the tax rate of the recipient. You pay little or no income tax at all during the investment. Tax benefit provides your child with an excellent income source for funding education.
Part of the extra funds the government contributes to the scheme comes from grants. Grant allocation has its basis on various factors such as the recipient’s family income. The Canadian Education Savings Plan complements the amount already invested by the subscriber. The revision of the 2007 Canadian federal budget brought significant changes. Before that, the grant project supported 20% of the initial 2, 500 annual contributions. After the new changes, the figure rose to $ 500 per year. The government grant can contribute as high as up to a value of $ 7, 200.
RESP tries to include subscribers from all households with different incomes. The flexibility makes it possible for low-income households to subscribe easily. The government fulfills the strategy through Canada Learning Bond (CLB). CLB aims at encouraging low-income families to plan for their children’s education. It’s vital to note that significant changes arose after substantial adjustments in 2004. The changes proposed on an extra amount of $ 500 for the Canada Learning Bond. The extra $ 500 is a guaranteed amount after opening an RESP account for their children. Moreover, the individuals who remain in the scheme receive $ 100 per year from CLB.
RESP comes with various advantages that you or your group can enjoy. The easy access allows anyone to join and support the children’s education. It is easy for you to receive the bonus money from government grants and bonds if you merit. You also have the guarantee of getting your money back if your child does not use it. The arrangement does not limit the number of plans per child.
RESP does not come without some drawbacks. The first challenges are that the amount contributed has a limitation of $ 50, 000. It is thus a disadvantage as those who go beyond since they are liable for taxation. You are also not allowed to withdraw money for any other purpose.