“Besides, the investment income generated in the RESP is sheltered from tax anyway so there isn’t an advantage to a TFSA. And both accounts use after tax dollars. Unlike an RRSP, there is no deduction.” The other potential downside to an RESP is that once the money is withdrawn it will be taxed.
Here is a list of the big bank RESP GIC accounts along with their five year GIC rate:
- TD Canada Trust RESP – 2.1%
- CIBC RESP GICs – 2.1%
- Royal Bank RESP – 2.15%
- Scotia Daily Interest Savings RESP – 2.1%
- BMO RESP – 2.15%
how much money does the government contribute to an RESP? You can contribute to an RESP for up to 31 years, and the plan can remain open for a maximum of 35 years. Under the CESG, the government matches 20% on the first $2,500 contributed annually to an RESP, to a maximum of $500 per beneficiary per year. The lifetime maximum per beneficiary is $7,200, up to age 18.
Also asked, can I transfer RESP to TFSA?
Transferring Registered Accounts between Banks. In general, there are no tax consequences when you transfer your RRSP, TFSA, RESP, or RRIF directly between financial institutions. The transfer can be done in cash or in kind.
What happens to an RESP if not used?
If you have an individual or family RESP – You can get your investment earnings out of the plan if it has been open for 10 years and the beneficiaries have not pursued an education by the time they are 31 years old. The plan subscriber has to pay tax on any investment earnings taken out of the plan, plus a 20% penalty.
Is an RESP a good idea?
“Besides, the investment income generated in the RESP is sheltered from tax anyway so there isn’t an advantage to a TFSA. TFSAs are a good education-savings option because they provide more flexibility. Parents can now contribute up to $5,500 per year and the money is easy to contribute and to take out.
Can you withdraw money from RESP early?
RESP withdrawal penalty If you must collapse the RESP before the funds are depleted because your child doesn’t go on to post-secondary education or withdraws early, you could face hefty fines. The government portions will be returned to the government, and you withdraw your own contributions without penalty.
How do I choose an RESP?
Follow these two easy steps: Get a Social Insurance Number (SIN) for your child, and get one for yourself if you do not already have one. There is no fee; however, certain documents, such as birth certificates, are required. Choose an RESP provider that best suits your needs.
What are the benefits of saving money in an RESP?
Unlike RRSPs, contributions to an RESP are not tax-deductible nor are they taxable when withdrawn. The main benefit of the RESP is the ability to have all earnings (capital gains, dividends and interest) on the investments inside the RESP accumulate tax-free until withdrawn.
How much can you put in a RESP per year?
In order to get the maximum annual RESP grant of $500, you must contribute $2,500 per year or $208.33 per month to the RESP account.
How do I withdraw money from my RESP RBC?
In order to withdraw money from their RESP, the subscriber needs the beneficiary (student) to provide proof of enrollment confirming the beneficiary is enrolled as a full-time or part-time student in a post-secondary program or institution.
When should I set up an RESP?
Government grants can be earned up to and including the year a child turns 17. Practically speaking, most RESPs are opened for children before then, since most begin post-secondary education by age 18, though there is technically no age limit. Read more: The Debate: Should you invest in an RRSP or RESP?
What is RESP savings account?
A registered education savings plan (RESP) in Canada is an investment vehicle available to caregivers to save for their children’s post-secondary education. The principal advantages of RESPs are the access they provide to the Canada Education Savings Grant (CESG) and as a method of generating tax-deferred income.
At what age does the RESP grant stop?
Can I withdrawing from RESP for non educational purposes?
You can withdraw contributions at any time. But if withdrawn for non-educational purposes, grant money will be returned to the government.
At what age do you stop contributing to RESP?
In order to continue receiving CESG after age 15, certain contributions must have been made to the RESP by December 31 of the calendar year in which the child turns 15.
Can I buy a car with RESP money?
Education-related expenses So if your child needs a car to get to classes, you can use RESP money to pay for it, along with insurance, gas, parking and maintenance. Other eligible expenses may include rent, meals, living expenses, a laptop or tablet, a desk and student fees.
Can I use my RESP to buy a house?
RESPs are not the only way to invest for future education. The money can be used to start a business, buy a house, used for travel after school or for education. Quite frankly, it can be used for anything.
Are RESP withdrawals taxable?
Some RESP withdrawals are tax-free When Mom originally put money into the RESP, there was no tax deduction and thus there is no tax on the way out. These withdrawals are called Post Secondary Education Payments (PSE). The government looks at these contributions as Mom’s money.