Tax Benefits of a Registered Education Savings Plan

The tax deadline is drawing near, people are filing their paperwork and for many, tax season means a refund cheque coming in the mail! It can be tempting to take that money and use it to buy a much-coveted item like that new flat-screen television, but I’ve found that one of the most beneficial moves I’ve ever made in my life was to start treating tax season not as a chore, but as a chance to plan for the future.

Of course, with two young children at home, one of the biggest considerations I have when planning my budget is their education. Starting or topping up your child’s RESP can be a great choice for that tax refund cheque and starting an RESP for your child comes with some additional benefits too! I started an RESP for Zackary a few years ago after receiving some inheritance money when my grandmother passed away. I decided to deposit $500 initially. Then I learned that I would receive an additional $500 from the Canada Learning Bond (CLB) and another $200 from the Canada Education Savings Grant (CESG). My initial investment had already grown to $1,200!

Now with Benjamin getting older as well, I know that it’s time to start an RESP for him as well. So this year during tax season, I plan to make the same initial investment of $500 for him, and one of the advantages of having two children is that I can actually add Benjamin to Zackary’s existing RESP so that both children can benefit from the same fund and draw from it as needed. The advantage of this is that instead of having a set amount of money for each child, my boys can take more or less as needed. In other words, if Zackary decides to take a two-year trade course and Benjamin decides his passion requires a six-year degree, or vice versa, each can take the money they need for that education.

And as an added bonus, there are tax benefits as well! The investment earnings on an RESP are deferred and are claimed under the student’s name instead of the parent’s. Since most students are in a lower tax bracket with a higher exemption status, that means the taxes paid on those investment earnings are often much, much lower.

One of the most important considerations to me when deciding how to save for my child’s future is experience, and Heritage Education Funds boasts almost 50 years of experience managing RESP funds for Canadian families. While I may do my own research into the available benefits and options of investing in an RESP, I also want to be able to trust that the company I’m dealing with has the knowledge and experience to answer my questions and give me the advice I need. In fact, while I had known about the Canada Learning Bond and Canada Education Savings Grant, I learned just this year from the experts at Heritage Education Funds that I can also potentially receive an additional 10% of my annual contributions thanks to the Saskatchewan Advantage Grant for Education Savings (SAGES) – of which Heritage was one of the first RESP promoters to gain access to!

Heritage Education Funds Inc. is currently running a fabulous giveaway and if you have young children, it’s one you won’t want to miss! Win one of eight $2,500 contributions towards an RESP in the Annual RESP draw! Winning one of these prizes would be such a great way to get a head start on saving for your child’s education!

I’ve personally found that when it comes to meeting financial goals, it’s best to have a two-pronged approach. First, invest a small, consistent amount of money every month that will grow over time. But also periodically make a larger deposit when circumstances allow you to do so. That yearly tax refund is a great opportunity to top up your child’s RESP and ensure that he has the money he needs for future education. And with so many grants and benefits available when you make a deposit, it just makes sense to start saving early! You and your child will both be happy you did one day!