What ways can we plan for our Child’s education?

November 1, 2016

Consider using both the traditional Registered Education Savings Plan (RESP) and the Tax-Free Savings Account (TFSA) contributions as education savings vehicles.

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Using the TFSA A TFSA offers parents another tax-efficient method to provide for education planning. Anyone over 18 is eligible to contribute $5,500 into a TFSA, plus any eligible unused contributions. This is of particular interest to those who invest in stocks and equity funds, since when the money is withdrawn, there is no tax consequence.

Using an RESP In Canada, you can save for a child’s education with unique incentives. The Government of Canada will help you save money through the Canada Education Savings Grant (CESG).

  • The Family RESP plan Parents, guardians, and grandparents can open an RESP account for a child, insofar as the child has a valid Social Insurance Number (SIN), a birth certificate or permanent resident card. A child can be named in one or more RESPs and the maximum lifetime contribution limit to a child’s RESP is $50,000. A family plan can have one or more children related to you (your children, adopted children, grandchildren, brothers or sisters) named as beneficiaries of the RESP.
  • The Canada Education Savings Grant (CESG) This is a grant designed to provide a government contribution to deposits made to a child’s RESP. Insofar as the child is 17 years or younger, the CESG will be paid on the first $2,500 of the contributions made every year. It provides a Basic CESG amount equal to 20% of yearly contributions, up to an annual maximum of $500 per eligible child (up to $600 for families with lower incomes), with a lifetime maximum of $7,200. More info www.esdc.gc.ca/en/resp/info.page

Note: If the child has accumulated grant room, the Basic CESG will be paid on the first $5,000 of the contributions made per year.

Don’t miss out on your $7,200 Over 3 million children have already received the Canada Education Savings Grant.

There may be a province-specific benefit to encourage families to start planning and savings early for their children’s post-secondary education or training programs. For more information consider looking here:  More info: www.esdc.gc.ca/en/education_savings/provincial.page

Source: Government of Canada

Tax Disclaimer: The information provided is based on current tax legislation and interpretations for Canadian residents and is accurate to the best of our knowledge as of the date of publication. Future changes to tax legislation, and interpretations may affect this information. This information is general in nature and is not intended to be legal or tax advice. For specific situations, you should consult the appropriate legal, accounting or tax advisor.

 

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