Maximize Your RESP: A Simple Guide.
Registered Education Savings Plan (RESP)
Here's how to make the most of it.
1. Start Early
The sooner you start, the more time your savings have to grow.
Contributions grow tax-free until withdrawal.
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2. Maximize Government Grants
Canada Education Savings Grant (CESG): The government matches 20% of your contributions up to $500 per year, with a lifetime maximum of $7,200.
Additional CESG: Low- and middle-income families may receive up to 40% on the first $500 contributed annually.
Canada Learning Bond (CLB): Eligible low-income families can receive up to $2,000 without needing to contribute. (Just for opening the account!)
3. Contribute Strategically
Aim to contribute at least $2,500 per year to get the
full CESG.
If you can’t contribute every year, you can catch up
on unused CESG from previous years (up to $1,000
grant per year). Ex: $5000 deposit = $1000 grant
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4. Invest Wisely
Choose a mix of investments (stocks, bonds, GICs) based on your time horizon and risk tolerance.
Consider shifting to lower-risk investments as your child approaches post-secondary age. We do this all the time.
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5. Plan Withdrawals Efficiently
Educational Assistance Payments (EAPs) include government grants
and investment growth—Grants and Interest are TAXABLE to the STUDENT.
Return of Contributions (ROC) is tax-free when withdrawn.
Withdraw EAPs strategically to minimize taxes and maximize available
funding.
6. Beneficiaries
You can name multiple beneficiaries under a
family RESP if you have more than one child.
If a child does not attend post-secondary, the
funds can often be transferred to another
beneficiary or rolled into an RRSP under
certain conditions.
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7. Use RESP Funds for Various Education Costs
RESPs can be used for tuition, books, housing, and even
some living expenses.
Funds can be used for full-time and part-time studies at
universities, colleges, trade schools, and other eligible
programs.
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8. Avoid Common Mistakes
Don't overcontribute: The lifetime contribution
limit per child is $50,000.
If the beneficiary doesn’t pursue post-secondary
education, there is a backup plan (transfer to RRSP,
another beneficiary, or withdrawal with tax
implications).
Take Action Today!
The earlier you start and the more you contribute, the better prepared
you'll be for your child's education expenses.
Make sure to take full advantage of available grants and investment
opportunities!
506-378-4333
For Informational purposes only. Please consult with a professional for more detailed information.
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