Seeing as how the Registered Retirement Savings Plan deadline was yesterday, it is good timing to go over another type of Registered Savings Plan. RESP is the abbreviation for Registered Education Savings Plan. RESPs are similar to RRSPs in that the investor is putting money away for future use down the road, but RESPs are obviously meant for education rather than retirement.
In an attempt to influence people to invest in RESPs the federal government will also contribute to RESP up to a certain amount. This is something that every parent should try to take advantage of, because who doesn’t like ‘free money’!?!
In an article written by Jane Taguicana, Starting an RESP for your child now will make the most of savings plans, a review of why it’s a great idea to start an RESP plan for young ones while they are still very young, she states that
“experts say the government grants you will receive are the best reasons to start early and contribute often.”
Taguicana goes on to explain that “through the Canadian Education Savings Grant, the federal government makes a 20-per-cent matching contribution on the first $2500 invested annually to a maximum of $7200 for the life of the plan.”
Taking into consideration that not everyone makes the same income, and some might find this difficult to budget for, she continues to say that “additional government contributions are available for those in the lower income bracket.”
George Hopkin, president of Knowledge First Financial mentioned that “setting a monetary goal is key before opening up a plan … once you figure out how much you need (want to put aside), take a close look at how much room you have in your budget.” He added that he feels “starting early helps you take advantage of the compounding effect.”
Before you open an account know that there are two different styles of RESPs commonly invested in.
1. An individual plan; one beneficiary that can be for anyone the investor chooses.
2. A family plan; one or more beneficiaries that must be connected to the investor by blood, adoption, or marriage.
If you would like to learn more about government contributions, or if you would like help with setting an RESP goal and budgeting for it please contact me.
Tyler Brown – Financial Security Advisor
WP: (519) 648-9580
CP: (519) 212-9859
FX: (519) 489-2740
244 Woolwich St. South, Unit #1 ~ P.O. Box 261 Breslau, ON ~ N0B 1M0