How much will school cost?
The cost of an education is growing faster than inflation! So, how much will an education cost? Use this education calculator to find out.
How will you pay for this?
One of the best ways is by using a Registered Education Savings Plan (RESP). So, what is an RESP and how does it work? Should I bother with opening one, I heard they take my money if my kids don’t go to school? Let’s look at what an RESP is and how they work and most importantly let’s see why you should have one!
What are RESPs
An RESP is a special account where you can deposit money to grow tax free for your child(ren) to use for post-secondary education. When it is time to withdraw the taxable portion of your withdrawals are charged to the child going to school. Because they usually don’t have a large income, very little tax gets paid.
Do I get a tax receipt for deposits?
I get asked this question a lot, the answer is no. There are other incentives for opening an RESP and this brings me to the best thing about RESPs.
Do you like free money?
By opening an RESP you can receive free money. This is how it works:
- First is the Basic Canada Education Saving Grant where you can get up to $500 or 20% of what you put in per year, this grant is available for all qualified RESP plans.
- For lower income households, there are additional grants of up to $500 the first year and then up to another $100 per year.
- Next we have the Canada Learning Bond for children in lower income households born after Dec 31 2003.this is $500 for the first year and then $100 per year until age 15.
- Next, starting immediately, all B.C. children with an RESP born on or after January 1, 2007 will be entitled to receive the BC Training and Education Savings Grant, which is $1200.00.
How much does this add up to?
If you make full use of the Canada Education Savings Grant you would get $7,200.00. If you are in a lower-income household the bonds could add up to as much as $2000 per child. Then for BC children born after Jan 1 2007 there is the additional $1200.00 grant. This comes to a possible total of $10,400 in free money.
Where else can you get 20%?
Even if all you get is the grant, you will still receive 20% from the government, but only if you open an RESP! So, what do you need to do? Open an RESP immediately! The nice thing about the bonds you can get them even with no contribution.
How can the whole family help?
RESPs can open by any family member so grand-parents can open an RESP for their grandchildren. If the parents open the RESP, cash can be given to the parents to invest. So, birthdays and Christmas at least part of the children’s gift could be cash.
How do you open an RESP?
RESPs can be opened at your bank or by an independent advisor. There are rules you need to be aware concerning withdrawals and what happens if no one goes to school. I will say here though you do keep all of your money and the growth. Speak to an advisor about RESPs and find out what is best for your situation so you can take advantage of the free money.