If you are looking for an effective stress-free plan to pay for your child’s post-secondary education, a Registered Education Savings Plan (RESP) is just the vehicle for you. Before you open an RESP, here is some great advice.
1. Be Prepared to Ask Questions
Some of the questions you need to be prepared to ask include: what fees am I required to pay? When? You also need to know if you have a choice as to the amount you are required to contribute, and when. When are payments released, and how will you receive them? You also need to know what happens if your child does not proceed to post-secondary education, or drops out of the program. What is your recourse if you change your mind after signing up for the plan?
2. Carry the Required Documents
To open an heritage education funds RESP, among documents you are required to bring along include the insurance card of your child, your social insurance card, permanent insurance card, and the birth certificate of your child. Once you are armed with these documents, proceed to open an RESP for your child.
3. Establish a Monthly Payment Plan
You get to decide how much you can afford to pay per month. The key is not only to start saving early but also to do it on a regular basis.
4. Decide How You Plan to Invest your Savings
One of the questions you will be asked after opening an heritage RESP is where you would like your savings invested. You can choose to invest in the low-risk GICs or, if you are risk-averse, open a no-risk savings account. You can also invest in mutual funds if you don’t mind the stock markets’ turbulence.
5. Establish if your Child is Eligible for the Canada Learning Bond (CLB)
To be eligible for the CLB, your child must have been born in 2004 or later. You should also be a beneficiary of the National Child Benefit Supplement, which is a component of the Canada Child Tax Benefit. This facility is set up for families earning below $40,970; the exact amount varies each year. For instance, if you and your child meet the above eligibility requirements, you can open an RESP, apply for the CLB, and the government will deposit $1,000 into your RESP account.
6. It’s Not a Must You Put Down a Deposit
If you are eligible for the CLB, you can still open an RESP for your child even if you don’t have money to make a deposit. It’s key that you take action. Start by opening an RESP account for your child and then apply for the CLB.
7. The Government Will Match your RESP Savings
The Canadian government calls this match CESG (Canada Education Savings Grant). It matches 20 percent on every $2,500 you contribute for your child every year. However, you can receive a 40% match on every first $500 invested in an RESP every year.
Investing in an RESP is one of the best decisions you can make for your child’s post-secondary education. There are government incentives that make it highly attractive to invest in an RESP, even for families with low incomes.