How can you take maximum advantage of the benefits offered by a Registered Education Savings Plan (RESP)?

It’s important to plan for a child’s post-secondary education by starting to save as early as possible. In this regard, the Registered Education Savings Plan (RESP) is a highly advantageous tax-sheltered investment. But the added value of this investment also lies in its many advantages. We’ll tell you more below.

RESPs are a profitable investment because of the government grants

One of the advantages of a Registered Education Savings Plan is the generous government assistance¹ that maximizes your invested capital. By making an annual contribution of $2,500 (or $209 per month), income permitting, your child could receive up to $12,800 in grants² , paid directly into their RESP!

• The Quebec Education Savings Incentive (QESI) is a Quebec government grant that increases your annual RESP contributions by up to 10%. The maximum amount is $250 per year, with a lifetime maximum of $3,600 per child.²
• The Canada Education Savings Grant (CESG) is a Canadian government grant that increases the first $2,500 contributed annually by 20%. The maximum is $500 per year per child, with a lifetime maximum of $7,200 per child.²

• The Canada Learning Bond (CLB) is a federal grant available to children from financially eligible families for post-secondary education, up to a total of $2,000.² Good to know: if they meet certain eligibility criteria, young adults can benefit too!

RESPs: a great way to invest tax-free

One of the advantages of an RESP is that it allows your savings, as well as provincial and federal grants, to grow tax-free. A significant tax advantage for your invested capital!

As soon as your child under age 18 is enrolled in an eligible post-secondary education program³ , you can start making withdrawals so that your child can receive educational assistance payments (EAPs)⁴. These are made up of accumulated investment income and government grants. They are taxable and must be added to your child’s tax return. Your contributions will be returned to you and are not taxable.⁵ Keep in mind that these contributions will continue to grow tax-free as long as they remain in the RESP. It may be advantageous to keep them in reserve as a supplementary fund for education or to reinvest them for younger members of the family, depending on the withdrawal strategy you choose.

Flexibility: A major advantage of RESPs

Opening an RESP with Kaleido means choosing flexibility in contribution amounts, frequency – and so much more. The range of IDEO+ RESPS allows you to define the savings strategy that’s right for you. In particular, you can opt for annual contributions or automatic monthly payments. This will ensure that you never forget to make a payment, and that you can maintain your savings pace. Payments can be stopped or modified at any time, at no cost.⁶

The flexibility of an RESP also lies in the choices your child can make in their educational path. RESP funds can be used to cover the cost of post-secondary education at all levels: vocational (VSD), college (ACS and DCS) and university.³