With Christmas around the corner, here is a great idea for a gift for a new child, niece, nephew or grandchild. We all know that little ones want toys and that’s great, but there is another gift you can give them that will pay off with big rewards in the end. Gift them with an RESP, which stands for Registered Education Savings Plan.
RESP’s weren’t around when my children were young. I wish they had been as they are a great way to help save towards the education of your kids. The government even has grants to help you grow that account, so there will be funds there for your child’s post secondary schooling.
While your child is going to elementary or secondary school, the money deposited into their RESP will grow tax free. When the money is needed to pay tuition at college or university, the money is withdrawn and tax needs to be paid at that time. However, since typically the student is at a very low tax rate, they will pay a low amount in taxes.
If you are a grandparent, this is a fantastic way to help your grandchildren through post secondary schooling. While their parents may find it difficult to put funds away because they have so many expenses with kids still at home, the grandparents can fund the RESP. The money grows through the years all tax free, until it needs to be taken out.
All that is needed to open an RESP is a Social Insurance Number for the child. Many small children of course don’t have a SIN but they can get one; all the parents need to do is apply. The child will be issued a number and the parents and grandparents can use that number to open the RESP.
There is another bonus to take advantage of. When an RESP is started, the parents can apply for two separate grant programs:
The Canada Education Savings Grant
The Canada Learning Bond
A total of $50 000.00 per child is allowed to be deposited. Although it is best for an RESP to be started when the child is young (much like an RRSP), there are still benefits to be had if the plan is started when the child is about 10 years old. There will still be a tax savings, plus a good amount of money in the account to fund that child’s education.
So, let the government help fund your child’s post secondary education by taking advantage of these two grant programs. You will find all the information you need by heading over to TD Canada Trust to learn more. They have a great infographic there showing the amount of money that can be saved by opening up an RESP. And pick those young kids up a nice toy to unwrap at Christmas time. Just don’t forget that you have the ability to help plan for their future as well.