5 Registered Education Savings Plan Tips for Parents
You may know the basics of Registered Education Savings Plan, a tax-deferred savings plan that helps parents save for a child’s post-secondary education, but there are several ways to to apply and check their full benefits that many parents don’t know Here are some great tips on how to get the most out of your RESP earnings.
1. Take Advantage of Free Money Available
There are different types of grants available. To gain access to some grants, applicants have to show a little commitment by making contributions. For example, you can get up to $3,200 of free money through the Canada Learning Bond and British Columbia Training and Education Savings Grant. For a chance to get free money, all you have to do is open a Registered Education Savings Plan.
2. Get Assistance from Loved Ones
Your chance of getting a more substantial grant depends on how much you can contribute to your child’s RESP. The Canada Education Savings Grant adds 20% to the first $500 of annual Registered Education Savings Plan contribution yearly. The maximum entitlement is capped at $7,200 per child. If you’re a low-income earner and can’t meet the threshold, you can seek assistance from family members. That is another way to get to the annual $2,500 contribution to further enhance your chance of getting this grant.
3. Be Mindful of Additional Charges
Many times, parents RESP earnings get drained by extra charges. Many institutions charge fees for set-up, enrolment, annual administration, and more. These little fees add up and impact your earnings. Luckily, there are many institutions that do not charge extra fees. Do your research and partner with your RESP account..
4. Flexibility Is Key
Your kids’ education aspirations may not conform to yours. Post-secondary education isn’t for everyone. You can only know what your child aspires to be once they’re old enough to make this determination. It is therefore recommended to choose an RESP plan that allows for no-charge flexibility to another child. This usually happens when one child decides not to attend a post-secondary institution. If none of your children pursue post-secondary education and you close the plan, then the earnings can go into your RRSP tax-free.
5. Consider Who Should Open the RESP
Another way to maximize your earnings from the RESP plan is to consider who should open the Registered Education Savings Plan. Many professionals advise that the RESP should be set up by the youngest parent, thus making him/her the subscriber. If you happen to close the plan, the subscriber can get RESP earnings transferred into his or her own RRSP tax-free. For this to take place, the subscriber must be below the ages of 71. That is the age limit for RRSP contributions.
Registered Education Savings Plans are one of the best education savings plans that set the path for your child to actualize their dreams and aspirations in life. Unfortunately, many parents in Canada are not taking full advantage of this government-assisted education fund. With these few tips listed above, it is possible to boost your savings in the best way possible.