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What is an RESP and Why Should you Have One

What is an RESP and Why Should you Have One

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Published by Programme B

If you have children in your life, understanding RESPs, what they are, and how they work, could be very beneficial for you. RESP stands for Registered Education Savings Plan, and as the name suggests, this is a type of savings tool that is specifically designed to ensure a child can afford to pursue their educational dreams and move on to the career they have chosen without the lack of adequate tuition holding them back.

Changing lives for the better

A good education benefits you for life. It opens doors and can lead to success, wealth, and happiness. By contributing to a RESP, you’re giving a child you love so many opportunities for their own future. It’s a wonderful gift, and will have such a great impact well after the gifts of toys and games are long forgotten. You can open an RESP for any child, not just your own, so you may wish to start an RESP for a grandchild, niece, or nephew.

As well as individual RESPs, a family plan RESP can be opened for all children as long as they are siblings and under the age of 21 when the RESP is opened, so you don’t have to start a new RESP for each child. New names can be added to the RESP as you go along. Interestingly, you can even open a RESP for yourself so any teens with a part-time job can even invest in their own educational future.

Financial incentives make RESPs even more desirable

As you put money away, the savings build up and those savings grow, but there are more benefits on top of this. Firstly, the earnings your money makes while it is held in the plan is totally tax-free, and secondly, by utilizing a RESP as the way in which you save for your child’s future education you will then be eligible for government grants such as Canada Learning Bond that will top up your RESP, matching 20% of your contributions up to a maximum of $7200 per child. On top of this, you may also be eligible for a local provincial grant such as the Saskatchewan Advantage Grants for Education Savings for Saskatchewan residents, so you can see how your funds can really add up by using this method of saving as compared to a standard savings account. Your RESP provider will use their expertise in these matters and apply for these grants on your behalf so you won’t have to worry about that at all.

It’s a hassle-free way to save

As RESPs have been specifically tailored for the sole purpose of saving for education, using them for their designed purpose is simplicity itself. Many RESPs can be opened with just a small monthly contribution, and you can have it all set up in just a few minutes. Making your contributions is totally flexible too. So for example, if you’ve had a windfall and would like to make an extra lump sum payment, then this is totally fine with a RESP and won’t bring about any problems or penalties as long as your total investment doesn’t exceed the RESP Contribution limit.

Choose a flexible  RESP and you are in control. With a RESP you can easily use a calculator to determine how much you should be putting away each year to ensure all educational options are open for your child, but you can alter these figures to suit your lifestyle. Taking time off work to raise little ones? Then you can lower your contributions for a while. Got a pay rise? Then you can increase the amount you put away. Life changes, and so RESPs are a flexible plan that takes this into account and lets you decide how you use them.

Photo by Anna Shvets from Pexels

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