For some people, it’s easy to set aside money for a short-term goal like a summer vacation. But saving for your child’s education fund, which may not be used for another 18 years, can seem downright impossible.
A Registered Education Savings Plan (RESP) is an excellent way to save for a child’s post-secondary education. Anyone can open an RESP and anyone can contribute, up to a lifetime total of $50,000 per child.
While the contributions to this education fund are not tax deductible, any investment income that is earned is not taxed until it is withdrawn. In addition to tax-deferred growth, the Canadian government automatically gives you 20% on the first $2,500 placed in the child’s RESP each year—that’s $500.00 per year up to a lifetime maximum of $7,200.
Back-to-school time is just around the corner for many post-secondary students. But this year, some Canadian students will be receiving even more money. The best part is that they don’t have to pay it back. It’s basically free money.