Having a Registered Education Savings Plan (RESP) is a great way to save for your child’s education, but are you making the most of your savings potential?
Get the facts on RESPs
Many parents today have RESPs for their children, but don’t completely understand what they are and how they work. We can help make sense of this smart, tax-deferred savings strategy and help you optimize the power of an RESP for your child’s future.
What exactly is an RESP?
Very simply, a Registered Education Savings Plan (RESP) is an investment vehicle that allows contributors such as parents, grandparents, friends and other relatives, to save for a beneficiary’s (usually a child’s) post-secondary education. Up to $50,000 in contributions can be made towards a child’s RESP (before grants and income). Over time, your RESP should generate income that will be available the day your child is ready to start his or her post-secondary education.
Did you know it could cost $150,000 to send your child to university by 20301?
How does an RESP benefit you and your child?
Here are some smart reasons for opening an RESP for your child
Tax-deferred growth - Any income and capital growth within an RESP is untaxed until it's withdrawn
Grant money - Having an RESP entitles your child to $7,200 or more in federal and provincial government grants
Grant money? Tell me more ...
RESP FACT: Did you know that 43.6% of Canadian families with children under the age of 18 receive the Canada Education Savings Grant (CESG)?
Your child is eligible for up to $7,200 in federal grants and more in provincial level grants once you open an RESP.
|TYPE OF GRANT||EXPLANATION|
|Canada Education Savings Grant (CESG)||Everyone is eligible for the basic CESG which matches 20% of the first $2,500 you contribute to your child’s RESP each year up to lifetime maximum of $7,200|
|Canada Learning Bond (CLB)||Children of families with lower income may receive an additional $500 in the first year and $100 per year for every year you qualify thereafter until your child turns 15 – up to an additional $2,000 in grants towards your child’s RESP|
|Additional CESG (ACESG)||If your family has an annual income below $87,123 your child may be entitled to an additional grant on the first $500 you contribute to his/her RESP each year. This extra 10% or 20% grant as referred to as the ACESG.|
|Quebec Education Savings Incentive (QESI)||If your child lives in Quebec, your child may be entitled to receive 10% to 20% on the first $500 contributed each year, and 10% on the next $2,000 up to a lifetime maximum of $3,600.|
|Saskatchewan Advantage Grant for Education Savings (SAGES)||If your child lives in Saskatchewan, your child may be entitled to receive a grant at the rate of 10% on contributions every year up to a maximum provincial contribution of $250 per year per beneficiary.|
Maximize your child's RESP
RESP FACT: In 2011, Canadians held $31.6 billion in their RESPs.2
Use this quick CESG reference chart for a list of key contribution rules and numbers.
|$2,500||This is the amount of the annual grant-eligible contribution room. This amount is based on the calendar year and not the birth date|
|$2,000||This is the amount of annual grant-eligible contribution room accrued each year starting from the year your child was born or 1998 (whichever is later) up to and including 2006|
|20%||This is the amount of CESG earned on an eligible contribution. For example: a $1,000 contribution would earn a grant of $200 in one year, if that contribution is eligible for a grant. There are additional grants available for lower income families.|
|$500||This is the maximum amount of grant a beneficiary is eligible to receive for each calendar year from the year they were born or 2007 (whichever is later) to the year they turn 17 years old. This amount was only $400 for prior years (1998-to 2006).|
|$7,200||This is the lifetime CESG limit per beneficiary. If you contribute $2,500 every year, you will hit the maximum grant level in the fifteenth year, after which no additional grants will be paid to the beneficiary. This limit includes additional CESG available to lower income families.|
|$50,000||Lifetime contribution limit per beneficiary. Because there is no annual limit, you could potentially make one single contribution of $50,000 to an RESP if you choose.|
|Contribution room to carry over||Great advantage of an RESP; you can carry over unused contribution room into future years. However, there is a catch: Only one previous year’s worth of contributions will attract unused grant for the previous year(s) to a maximum of $1,000 of grant per year.|
|Contributions are not tax deductible||You won’t get a tax slip, and you can’t deduct RESP contributions from your taxable income.|
The story is in the numbers. More than ever, a post-secondary education is critical to your child's future success. But at the same time, the cost of education is dramatically on the rise.
RESP FACT: $1.6 million more: what graduates with a Bachelor's degree will earn over their lifetime compared to high school graduates3
RESP FACT: 2 out of 3 new jobs: require a post-secondary education4
Let the CST AdvantageTM give you peace of mind
Principal protection. In over 50 years, planholders have never lost a dollar of their principal investment.
Stable returns, secure growth. Earn stable and competitive rates of return, without having to worry about how your plan is doing.
Hassle-free. You don’t have to constantly monitor performance or worry about how your plan is doing. Just decide how much you want to contribute and how often and we’ll take care of the rest.
Flexible study options. CST Plans allow you to pursue and fund your part-time or full-time education almost anywhere—university, community college, vocational, technical, trade, and religious schools, as well as distance learning and correspondence. Contact us to find out about eligible programs.
1 Projected tuition costs of a 4 year university program are based on the annual average cost of tuition across Canada for the previous school year and an assumed average annual increase of 4.5%. Room and board are based on typical cost for residence with an average annual increase of 3%. Projection includes the cost of entertainment; transportation and books adjusted using an annual inflation rate of 2%. Source: Statistics Canada 2012 and university websites.
2 Human Resources Development Canada Annual Statistical Review, 2011
3 Association of Universities and Colleges of Canada (AUCC), based on Statistics Canada Labour force survey; average annual earnings, 2011.
4 Looking Ahead: A 10 Year Outlook for the Canadian Labour Market 2006 - 2015, Human Resources and Social Development Canada.