What are the benefits of having a Registered Education Savings Plan (RESP)?
Setting aside money for your child’s post-secondary education is crucial, the RESP account is the best vehicle to make contributions, as it is tax deferred and can receive grants or bonds from the government to maximize growth to your savings.
A lifetime total contribution limit of $50,000 can secure your child’s future education plans and government program like the Canada Education Savings Grant (CESG) and Canada Learning Bond (CLB) are government contributions that can help grow the savings yearly.
There is no yearly limit to how much you want to put into the RESP but it is worth putting in $2,500 yearly because the government will contribute 20% ($500) in grants that year. This is not mandatory, and you can claim up to $1,000 in grants per year, so if you cannot contribute $2,500 yearly to the RESP, there are still other ways to save and receive government contributions.
You can contribute to the RESP for a total of 31 years and the plan can remain open for 35 years! This is an ideal way to save for your child’s education even if they start later on, and this can be useful for those who have children pursuing post-graduate studies.