Take a SmartStep and plan ahead with a Registered Education Savings Plan

Post secondary education costs continue to rise and it is estimated that the cost for a university education in 2028 will, on average, cost over $100,000. Trying to pay for that all at once could reach into your pocketbook well beyond graduation. There is a way to start saving now and best of all the Government wants to give you money!

An RESP is a wonderful way to save for your children’s’ education. To encourage you to start now the government will pay a 20% grant of $500 per year for qualifying beneficiaries up to a lifetime maximum of $7,200 per child. There is no annual contribution limit and the lifetime maximum is currently $50,000 per child. Care should be taken to spread out the contributions over a number of years so you can still qualify to take full advantage of annual government grants.

How does a RESP work?

Set up

• Decide what type of RESP you want; savings, term deposits or mutual funds*
• Apply for a social insurance number (SIN); you have to have one for yourself and one for the beneficiary of the plan (child)
• Contact your Comtech branch or Financial Service Officer for information and advice on RESPs

Contributions

• Contributions made to an RESP are not tax-deductible
• Earnings are tax sheltered and generous Federal Government incentives are available
• Contribution limits of $50,000 lifetime per child
• Convenient and easy contributions through direct deposit, payroll deduction, automatic transfer, by mail or in person
• Mutual funds*, term deposits, and savings plans available

RESP Accounts are offered through Credential Asset Management Inc.*, Credential Securities* and Concentra

Grants and Incentives

A basic Canadian Education Savings Grant of 20% of the contributed amount to a maximum of $500 per year for each eligible child registered under this program is paid by the Federal Government into the RESP.

ESDC will also pay an additional CESG amount for each qualifying beneficiary. The additional amount is based on your net family income and can change over time as your net family income changes.

For 2017, the additional CESG rate on the first $500 contributed to an RESP for a beneficiary who is a child under 18 years of age is: 

• 40% (extra 20% on the first $500), if the child's family has qualifying net income for the year of $45,916 or less; or
• 30% (extra 10% on the first $500), if the child's family has qualifying net income for the year that is more than $45,916 but is less than $91,831.

The following chart gives you a brief overview of how the CESG is calculated depending on your family net income:

Withdrawals

• The government grant and accumulated income earned in the RESP are paid to the student to cover educational expenses
• Your child can use the money for full-time or part-time studies in an apprenticeship program, CEGEP, trade school, college or university.
• If your child decides not to pursue post-secondary education, options to choose another beneficiary are available

Taxation

• The grant and accumulated income are taxable to the student in the year paid
• When the student attends an approved post-secondary institution, the RESP principal deposits can be returned to the subscriber of the RESP or be paid to the student, tax-free

Additional Benefits

• Variety of options to choose from and the sooner you start, the more you will earn

Links for More Information

• Registered Education Savings Plans - Government of Canada
• Career Navigator and Quizzes –Skills Evaluation tools
• Financial Services Regulatory Authority of Ontario