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RESP for your Children

Today we are going to review some of the basics of this plan and how it can help your family. To start off, anyone can open an RESP for a child - parent, grandparent, friends, etc. There are currently no yearly contributions limits to the RESP, however, there is a $50,000 lifetime maximum for each child.

You can receive up to $500 of free money per year via the Canada Education Savings Grant. This assumes a high household income and a yearly contribution of $2,500. If you have not contributed in past years you can also recapture one additional back year per year (meaning you can put in $5,000 and receive a CESG of $1,000).

How are RESP’s taxed? All of your after tax money that you put into it is then taken out tax free. The grant money and any growth are taxed in the hands of the student. This way, the student will pay tax when they will most likely have a low income and not much tax is paid. The RESP gains within the account are tax deferred until taken out of the account.

It is recommended that the funds are placed in less risky investments the closer to the start of school for the student. This way you are not withdrawing the funds when the market is potentially down. When the student is a few years away from starting school you should start keeping a year or two's worth of liquid funds to make sure this doesn't happen.

Please contact Merrick Financial Inc. for all of your financial planning needs.

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