RESP contributions grow tax-free.
The following article is a guest post by SmartSAVER.org, a non-profit organization.
Many of us will go out of our way to redeem coupons or find freebies, but why aren’t we taking advantage of free money for post-secondary education? One reason may be that many people don’t know about government programs offering free money, or find it too complicated to obtain it. When it comes to Canadian kids’ education, the government has developed grants and bonds to help get savings started. Read on to learn about three ways you can get free money for your children’s education.
Canada Learning Bond
The Canada Learning Bond is a Government of Canada program that provides up to $2,000 in education money. If you have a child born on or after January 1, 2004, and your net family income is less than $43,953, you are eligible for this money. You do not need to pay any money or make any contributions to get the Bond, but you will need to open a Registered Education Savings Plan (RESP) to receive it. If you’re ready to apply for the Canada Learning Bond and a no-cost RESP, start your application online at www.SmartSAVER.org.
Canada Education Savings Grant and Additional Canada Education Savings Grant
While not everyone qualifies for the Canada Learning Bond, everyone is eligible for a government RESP matching incentive called the Canadian Education Savings Grant. When you contribute money to your child’s RESP, the government will match your contribution by 20 – 40% depending on your income level — up to lifetime grant limit of $7,200 per child. To learn more about the Canadian Education Savings Grants visit the Federal Government’s CanLearn website.
Tax Sheltered-Growth
While contributions to an RESP are not tax-deductible, any growth is tax-sheltered for as long as the funds remain in the plan. When your child is ready to go to post-secondary education the funds are taxed at the child’s income level, which as a student means they will likely pay little or no taxes.
So how do you get all or some of this free money? You’ll need to open a Registered Education Savings Plan to receive the Canada Learning Bond, the Canada Education Savings Grant, and the tax benefits. Get started by going to SmartSAVER.org and using the Start My RESP application. Start My RESP provides the convenience of online access, a user-friendly process and a direct connection to RESP providers who offer no fee RESPs with no minimum contribution. You can also open an RESP by visiting your financial institution in person.
What do you think of RESPs? Have you opened an RESP for your child?
Sean Cooper is the bestselling author of the book, Burn Your Mortgage: The Simple, Powerful Path to Financial Freedom for Canadians, available now on Amazon and at Chapters, Indigo and major bookstores, and as an Audiobook on Amazon, Audible and iTunes.