The full form of RESP is the Registered Education Savings Plan. It is an excellent method to save money for the education of either your child or a child you care about deeply. But how does it help in the run. This article sheds light on the same.
RESP has plenty of benefits, here are a few:
Aid from the Government
People are generally not aware of this; however, when you can keep your money in an RESP, Government offers help throughout. It too contributes to its end. When this money is combined with the one you add to the account implies that your child may not need a student loan.
Each Canadian child gets the Canadian Education Savings Grant (CESG), and this is 20% of the money invested by you. It can go up to $500 maximum every year. There are some additional grants too.
Low Tax
Whenever you take out money from the account, you are subjected to a tax penalty. The best part is that the tax is levied based on the bearer’s account. So when you withdraw money, it is assumed that it is needed for your child. But they are only students; only a small amount is required to be made.
Flexibility
It is a common practice that when you put some money in an education saving account, you are not allowed to take anything from it until the child starts attending school. This rule is made to ensure that people don’t spend their money without replacing; however, sometimes the financial circumstances require immediate money access.
An RESP allows withdrawing as much money as you want and at any time. So, when in the money crunch and you have no place to go, turn to this handy solution. But it is your utmost responsibility to return the money and leave it for the purpose it was saved initially.
For those who are interested in knowing how to open an RESP account, here is a showdown:
Do It Yourself
The first option is to open a statement all by yourself if you wish to do it yourself. Going by the Knowledge First Financial Reviews, it seems like the best option in town. The company helps in receiving post-secondary education without hassles.
Another option is to open up a discount brokerage account. A key advantage of opening this is that you can purchase Exchange Traded Funds and these are inexpensive, but you cannot buy these more frequently or else it will cost you heavily.
Financial Advisor
If by any means you have doubts setting an account, investing individually seems like a risk, and you have no issues in paying little more fees, you can always set up an RESP account in your bank with the assistance of a financial advisor. Do inquire about the fees as several RESP accounts are charged with an yearly administration fees.
Pooled Plans
Group plans or pools are administered by RESP providers. These must be avoided at all costs. These come at a high fee and have a strict schedule for contribution and several penalties if you do not comply with it or if your child doesn’t go to the school.
But if you have entered in any one of the plans, you must continue with the plan. There is no point falling into the trap of penalties. Having cited so many reasons doesn’t mean these are bad, but you can always have better options around.
Summing up
Going by the benefits, it makes sense to start an RESP account as soon as possible. The government will help, but you always have many more convenient ways. Pick the one that you like without worrying about the taxes.
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