Registered Education Saving Plans

What will it cost to educate your Children?

"Life is full of uncertainties. Future investment earnings and interest and inflation rates are not known to anybody. However, I can guarantee you one thing; those who put an investment program in place will have a lot more money than those who never get around to it." - Noel Whitaker, Financial Author, Sydney Australia Morning Herald

Possibly one of the most overlooked aspects of our clients' financial plans is funding post secondary education for their children. For those of you with young children or even grandchildren, we strongly recommend a discussion on this topic at our next review meeting.

A Registered Education Savings Plan (RESP) is a special savings account that can help you, your family, or your friends save for your child's education after high school.

The Government of Canada allows savings for education to grow tax free until the child named in the RESP enrolls in education after high school. That child is known as a beneficiary.

A parent, grandparent, other relative, or friend, can open an RESP for a child. The person who opens an RESP is called a subscriber.

Benefits

With an RESP, you can begin saving immediately for the child's future education. Many parents wonder how much they should save. They also wonder how soon they should start. The answer is simple - save as much as you can afford. Start today. If you start early, tax-sheltered earnings on your savings can grow surprisingly quickly.

Further, if you are saving for your child's education, the Government of Canada will help you with special saving incentives, including the Canada Education Savings Grant and the Canada Learning Bond that are only available if you have an RESP.

Choosing the Right RESP

There are two main types of RESPs:

Family Plan

In a family plan, you can name one or more children as a beneficiary of the RESP, but they must be related to you. They may be your children, adopted children, or grandchildren. A family plan may be a good choice if:

• You would like all, or any one of the children named in the plan, to be able to use the money.
• You want to decide how to invest the money, either on your own or with the help of a financial advisor.
• You don't necessarily want to make regular monthly payments.

Individual Plan

An individual plan is set up for one beneficiary who does not have to be related to you. An individual plan may be a good choice if:

• You want to save for a child who is or is not related to you.
• You want to decide how to invest the money.
• You don't necessarily want to make regular monthly payments.

Using Your RESP

As soon as the child named in your plan is enrolled in a qualifying educational program, he or she can start receiving payments from the RESP called Educational Assistance Payments.

Qualifying Educational Programs

Usually, a qualifying educational program is a course of study that lasts at least three consecutive weeks, with at least 10 hours of instruction or work each week. A program at a foreign educational institution must last at least 13 weeks.

Qualifying educational programs include apprenticeships and programs offered by a trade school, CEGEP, college or university.

RESP funds can be used for full-time or part-time study in a qualifying program.

To find out more about qualifying educational programs contact the Canada Revenue Agency toll-free at 1-800-959-8281.

Opening an RESP is easy!

In fact, we can help you follow these simple steps:

1. Obtain a Social Insurance Number (SIN) for yourself and for any one you name in your RESP as a beneficiary. There is no fee to get one; however, certain documents are required. Contact 1-800-O-CANADA for more information or visit a Service Canada centre near you.
2. Apply to the Canada Revenue Agency for the Canada Child Tax Benefit if your family net income is $75,769 or less. This form is generally provided at the hospital where your child was born.
3. Decide on the type of RESP you want, the portfolio management strategy to make your funds grow, and start to make deposits into your RESP.

Your RESP Provider

As part of our comprehensive wealth management services, we can guide you through each step of the process. Since it is a longer-term investment, in some cases in excess of 20 years, we can help you:

1. Decide on the type of RESP that best meets your needs. You can choose a family plan or an individual plan.
2. After you decide on the type of plan that best meets your needs, make your money grow with wise investments.

When it is time for your beneficiary to start using the RESP, we will co-ordinate with the RESP provider who administers the payments and ensure that they conform to the terms of your plan. If the beneficiary does not continue education after high school, we will communicate with your RESP provider to ensure that your contributions are returned to you and inform you how much income you made on those contributions.

If your Beneficiary does not Continue Education after High School

If the child decides not to continue education after high school, you may be able to:

• Wait for a period of time - he or she may decide to continue studying later
• Use the money for a brother or sister who does continue education after high school
• Transfer the money into a Registered Retirement Savings Plan (RRSP) to help you save for your retirement
• Withdraw your personal savings, tax-free

Making Your Money Grow

Once you have decided whether to open a family or an individual plan, we will help you to develop and implement an investment program and portfolio management strategy to meet your funding objectives.

For more information about RESPs, or to set up an appointment to discuss a savings strategy for your children's post secondary education, please feel free to contact our office.