New Parents: Making RESP ContributionsJake Steele, Wealth Advisor
I recently became a new parent at the ripe old age of 40. It has been exhausting, amazing, and overwhelming all at the same time. There are many things to consider financially for your new child, and this can feel daunting.
The first topic I will tackle in this series of blogs is the Registered Education Savings Plan (RESP).
RESP Grant BC parents should access for their child’s education
RESP’s are made up of contributions (principal) and different government grants. For example, the Canada Education savings Grant (CESG) is an RESP grant wherein the government contributes 20% of the first $2,500 contributed by you annually (up to $500 per year). This grant money is available up until a child is 17 years old. There is also a Canada Learning Bond (CLB) that provides extra grants for low income families.
A RESP is a tax-sheltered investment that is designed to help with a child’s post-secondary education. The principal (contributions) are not taxed upon withdrawal, while the grant money (CESG), and investment growth are taxed at the child’s tax rate. While they attend school, income is generally low, so they will pay little to no tax.
The earlier you start contributing, the more money you will have for your child (or children’s) post-secondary education.
As a new parent, the RESP is a very good place to put away money for your child’s future.
One of the biggest hurdles for new parents is having the cash flow to put aside money for their children’s future. RESP’s are a great way to get the grandparent’s involved in saving for their grandchildren’s future. It is very common in our firm to have the grandparents set up a RESP for their grandkids.
If you are thinking about saving for your child’s future, the RESP is a smart, tax efficient place to start.
Contact us to learn more about RESP grants in BC and start saving for your child’s future.