Information about Canadian Registered Education Savings Plan. RESP rules and regulations: what you need to know. By now we know what RESP’s are, namely a registered education saving plan account. It earns you money and puts your mind at ease. But how does it work? Do you need to pay in tons of money at a time? It can be confusing to work out how contribution to the account works, especially if you have multiple people adding to the fund. Luckily we have the low down on all the rules about contribution and everything else you need to know!
Benefits Of A Registered Education Savings Plan
These days, getting a good education depends on the quality of the school you attend. With that said, better schools tend to cost more money. If you want to prepare early so that your child can attend school without worrying about the financial burden, you should consider signing up for a Registered Education Savings Plan (RESP). Here are a few benefits associated with that.
Help From The Government
Many people are not aware of this, but when you place money into an RESP, the government often steps in and offers assistance along the way. In fact, they are willing to contribute as much as $7,200. Combining this with the amount that you place into the account means that your child will be able to avoid being swamped in student loan debt.
Sometimes when you place money into an education-based savings account, you are not able to withdraw it until it is actually time for your child to attend school. While this rule is usually put in place to stop people from spending all of the money without replacing it, the reality is that sometimes a person’s financial situation changes and they need immediate access.
With an RESP, you can withdraw as much as you need whenever you like. If you are in a bit of a money crunch and there is nowhere to turn, this can definitely come in handy. It will be your responsibility to make sure that the money is returned and used for its original purpose; no one will be there to micromanage every financial move you make.
Every time you take money out of the account, it will be subject to a tax penalty. The nice thing is that the money is taxed based on the bearer of the account. Basically, every time money is withdrawn, they will base the tax amounts on the fact that your child needs the money. Since they are a student, they will only be required to pay a small amount, if any.
As you can probably tell by this point, getting an RESP is a very wise financial move that every parent should consider. Knowing that you will be able to take advantage of all the benefits that were listed here should be more than enough to convince you that this is a decision you really want to give some serious thought.