Your children's and grandchildren's education is very important. And, with the costs of tuition fees and text books on the rise, it's vital that you take the time to carefully plan the financing of their education.
A registered education savings plan (RESP) is a great way to put away money for your children's and grandchildren's university and college education.
For every contribution to an RESP of a child up to 18, the federal government will contribute at least 20% to an annual limit of $500 through the Canada Education Savings Grant (CESG). The maximum lifetime CESG is $7,200 per child.
Anyone can set up a family plan with more than one beneficiary provided the beneficiaries are under age 21 and are a direct relative. A direct relative is a parent, brother, sister, child or grandchild.
There are no age limits for an RESP set up for one individual. You can name yourself or another adult as the sole beneficiary of an RESP.
This education planning should be a key part of your overall year-round tax planing.
While contributions to a RESP are not tax-deductible, the income it generates accumulates tax-free.
Additionally, when your child uses the funds, the income is considered your child's income and is taxed at his or her low tax rate.