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Benefits of Getting RESP for Your Children

Most parents worry about letting their children have post secondary education because it is very expensive in North America and can only be afforded by wealthy families. It is important to plan for your children’s college education and think of the necessary finances for this decision. If families are looking at having some financial security, then sending their kids to college is a big possibility.

If your children want to go to college then it can be possible through RESP or Registers Education Savings Plan. The RESP is a savings plan that can grow tax free and is something that is sponsored by the government. Money paid from the plan at maturity may be taxed as income for the student.

Private companies or individuals are the plan administrators and they can invest the money that they collect from the plan. The yearly contributions per student can reach up to $4,000 per student and the lifetime limit is $42,000 without any tax implications. Each student may have more than one plan but the limit is strictly per student.

20% of your contribution is added by the government until the student reaches his 17th birthday. This is called the CESG or the Canada Education Savings Grant and any amounts paid in are not included in the annual limit for tax purposes.

The maximum amount that any student can receive from the CESG is $7,200 over the plan’s lifetime. Any unclaimed contribution of the CESG each year will accumulate and $800 can be paid which was not previously claimed. If the RESP is not eventually used for educations purposes, the CESG payments will have to be repaid to the government.

Any student who is a resident of Canada and has a Social Insurance Number (SIN) can apply for RESP. At the start of the plan, the SIN of both the student and the one who will make the contributors are required to be submitted to the plan promoter.

RESP plans comes in three types and they are discussed below.

In the non-family plan, anyone can make a contribution and there are no limits to the amount but only one student can benefit from it.

The family plan can have one or more beneficiaries as long as they are blood relatives or adopted by the person making the contribution. There are no requirements as when you should pay and how much you are going to contribute.

The group plan are offered by foundations that set how much is paid in and when. Plans are given to age groups who share the contributions equally. The rules attached to the group plan is quite complicated and should be researched thoroughly with the plan providers before committing.

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