Grasping the Mechanics of an Educational Savings Plan for Your Kids
Aug 14, 2018 @ 12:55
Children sitting together with parents and laughing

If you are a parent, it is understandable that you are always thinking about their future, especially their future education. While secondary school is relatively light on the pocket, tertiary education or college is something else.

In fact, the matriculation for college students has changed rapidly in just ten years from 1995 to 2015.

The cost of college education has indeed tripled in value, and one of the ways that you can guarantee someone’s education is by investing in a RESP o registered education savings plan.

Who can be the beneficiary of an Heritage Education Funds RESP? Anyone can be a beneficiary and anyone can sign up for an RESP by simply approaching a financial institution like a bank, or scholarship plan dealers.

Who can be the beneficiary of an RESP? Anyone can be a beneficiary and anyone can sign up for an RESP by simply approaching a financial institution like a bank, or scholarship plan dealers.

The Canadian government will step in to make contributions to the plan, until such time that the beneficiary requires EAPs for his/her post-secondary school education.

In addition to college or university degrees, a beneficiary can also use the money from an RESP in approved post-secondary school training programs. These training programs may not be considered conventional college degrees, but if such a training program is qualified, then the beneficiary may be able to receive EAPs tax-free.

Can an RESP expire or close? Yes, it can. The expiration or closure of an RESP will occur 36 years after it has been opened. 36 years is ample time for a beneficiary to decide whether or not he/she wants to commit to pursuing a university degree. In the event that a registered educational savings plan expires, the Canadian government may withdraw its contributions from the account’s total.

Money received from the CESG or the Canadian Education Savings Grant may be used alongside your contributions for purposes other than the education of the beneficiary, however, the money that you will receive will be considered regular income and there will be a government-imposed penalty amounting to 20% of the total amount of payments that you will withdraw from the savings plan.

Another possible source of contribution in your savings plan would be the Canada Learning Bond or CLB. Again, if the savings plan forfeits after 36 years, payments from the CLB will be withdrawn, too. But don’t worry: if you have conscientiously been making contributions to the plan as the person who has subscribed or signed up for it for the benefactor, your contributions will be returned to you as well.

As for any interest earned while you were contributing to the RESP, you can still receive the interest and the contributions you have made provided that: the beneficiary is at least 21 years old and is not eligible for a post-secondary school program and the RESP was opened at least a decade ago.

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