Paying for your children’s education out of your regular cash flow could seriously affect your lifestyle. A better approach is to start preparing now by saving a little every month in an MD registered education savings plan (RESP).
An RESP is a tax-sheltered investment account designed to help parents, grandparents or others save money for their loved ones’ post-secondary education.
Contributions: Unlike with an RRSP, when you contribute money to an RESP the amount is not tax-deductible.
Tax-deferred growth: Like all registered accounts, the investments grow tax-deferred.
Lifetime maximum: The maximum lifetime contribution for each child is $50,000. There is no annual limit, although the Canada Education Savings Grant (CESG) is only available on the first $2,500 in contributions each year. If there is unused grant room from prior years, you may qualify for an additional $500 grant (20% on the next $2,500 contribution) for a total of $1,000. The maximum lifetime grant is $7,200 per beneficiary.
Withdrawals: The beneficiary pays tax on the investment gains when the funds are withdrawn. Presumably, it will be at a low tax rate.
Easy to start
The MD RESP is convenient and can be funded for as little as $25 a month.
Flexibility of a family plan
If one beneficiary does not pursue post-secondary education, grants can be transferred among beneficiaries who haven't reached their lifetime grant limit.
RESP investment options
RESP investors have a wide variety of investment options, including MD Funds as well as stocks, fixed-income and third-party mutual funds.
Canada Education Savings Grant (CESG)
- 20% grant on the first $2,500 contributed to an RESP each year. If there is unused grant room from prior years, you may qualify for an additional $500 grant (20% on the next $2,500 contribution) for a total of $1,000. The maximum lifetime grant is $7,200 per beneficiary.
Additional Canada Education Savings Grant (Additional CESG)
- An additional 10% or 20% on the first $500 or less contributed to the RESP annually
- Benefits low-income and middle-income families
Canada Learning Bond (CLB)
- Up to $2,000
- $25 to open an RESP account
- $500 to add to the RESP immediately
- $100 per year until the child turns 15
- Benefits low-income families
British Columbia Training and Education Savings Grant (BCTESG)
- Provides a contribution of $1,200 to eligible children born in 2007 or later.
Saskatchewan Advantage Grant for Education Savings (SAGES)
- Provides a matching grant of 10% of eligible contributions up to $250 per year or a $4,500 lifetime grant per beneficiary
Quebec Education Savings Incentive (QESI)
- Consists of an annual incentive payment to an RESP for an eligible beneficiary who resides in Quebec, to a maximum of 10% of contributions (maximum payment of $250 in any given year)
Talk to an MD Advisor.
Talk to an MD Advisor today about opening your MD RESP account and discover how MD Funds can help you reach your goals sooner.