Important Definitions for Registered Education Savings Plans (RESPs)

When opening an account for registered education savings plans (RESPs), you must be aware of the important words you’ll encounter throughout the program. In this article, we list down important words and definitions you must remember.

Subscriber
This refers to the person that generally makes contributions to the RESP. Subscriber are not allowed to deduct their contributions from their income on their income tax and benefit return.
With the exemption of family plans, there’s no restriction on who can be the subscriber.

This person can be:
• You and your wife/husband or common-law partner, in which case you are joint original subscribers.
• A public primary caregiver of a beneficiary. This person/entity is the one entitled to a special allowance under the Children’s Special Allowances Act.
Public Primary Caregiver
A public primary caregiver is the one who receives special allowances (as mentioned above) and may be the department, institution, or agency that looks after the beneficiary.

Promoter
This is usually the RESP provider. The promoter pays the contribution as well as the income gained from those contributions to the beneficiary.

Beneficiary/Beneficiaries
These are the receivers of the contributions and the educational assistance payments (EAPs) from the promoter. The beneficiary has to include the EAPs on their income when they file taxes for the year in during which they receive such payments.

Qualifying Educational Program
A qualifying educational program is a post-secondary school level program that lasts for at least three consecutive weeks. It also must require the student (beneficiary) to spend at least 10 hours each week on courses in the program.

Specified Education Program
A specified education program is also an educational program at post-secondary school level. This must last for at least three consecutive weeks and must require the student (beneficiary) to spend at least 12 hours each month on courses in the program.

Canada Education Savings Grants (CESGs)
Canada education savings grants (CESGs) are funds that the government of Canada deposits to an RESP. To avail this, you need to present the beneficiary’s Social insurance Number as well as other proofs that the child is pursuing post-secondary education.

Canada Learning Bonds (CLBs)
Canada Learning Bonds (CLBs) are another type of grants that the government deposits to the RESPs. CLBs can be received as long as the beneficiary is eligible and the RESP providers offer such grants. These are not dependent on the amount of contributions you make, but it’s more focused on your child’s eligibility.

Educational Assistance Payments (EAPs)
An educational assistance payment is the amount that the beneficiary may receive to help pay for the costs of post-secondary education. CESGs and CLBs fall under this category.

Post-Secondary Educational Institution
A post-secondary educational institution can be any college, university, or other Canadian educational institutions.

It can also be:
• A Canadian educational institution that is certified by the Employment and Social Development Canada (ESDC) as offering non-credit courses for a student’s occupational skills development.
• A university or college outside Canada that offers courses at post-secondary school level. The student must be enrolled in course that lasts not less than 13 consecutive weeks.

Benefits of Having A Registered Education Savings Plan for Your Kids

Studies show that education is becoming increasingly expensive throughout the world. And many parents now worry they may not be able to afford to take their kids to school in the future. Let alone saving enough for their kid’s education. If you look at all the saving options, none of them even seem to be beneficial. So, what is the best way to save for your child’s education? Well, that is what this article aims to answer.
It is important that you save early for your child’s education. And if possible, you save as much as you possibly can throughout the entire time. A Heritage Education Fund Inc & Registered Education Savings Plan are by far the best option in the market right now. This plan will see to it that your child has everything he/she needs up to when he/she finishes school. There are many reasons you should opt for the Registered Education Savings Plan for your kids. This article will go into detail on some of the most crucial benefits you may want to note.

Government contributions
Opening a heritage RESP for your kids is the first step towards applying for financial aid from your government. This function is meant to encourage the parents to start saving as early as possible for their kid’s education. Most governments that acknowledge RESP offer grants to the parents who save for their children’s education. In countries like Canada, the government can give up to $7,200 for one child’s education. Other provinces may also be able to offer sizable amounts into the while contribution. All this will work towards securing your child’s education and future.

Tax-sheltered growth
Another great benefits of having a RESP for your kids is that earnings within it are not taxed. And when the funds are withdrawn for your kid’s education, they are only taxed in the student’s hands. This is often little to no tax. It will not hurt your kid’s educational or financial expenses. The admissible grants also grow tax-free which is a plus as well.

Built-in flexibility
As a parent, you can never be certain that your child will finish his/her education or even pursue post-secondary education. so, in case this happens, then you, the parent, can choose a new beneficiary. The good news is that you have up to 35 years to use the funds. It is flexible and allows your child to indulge in other things maybe even until he/she chooses to finally pursue his/her post-secondary education. so, you do not have to worry about time running out on you.

Automate your savings
You can also automate your RESP savings so you have a regular pre-authorized contribution plan. This way, you do not even have to think about this plan and concentrate on other important things. And the good thing about it is that you can start by saving as little as even $25 per week. You have the option of contribution weekly, bi-weekly, and even monthly. The choice is yours.

Early withdrawals
Yes! You can withdraw any principal contribution you make to the RESP whenever you wish to as its contributor. Also, if your child chooses not to pursue post-secondary education, then you are eligible to withdraw the accumulated interest as the contributor. This is called the Accumulated Income Payment (AIP). However, to get the AIP, the plan must have been in place for a minimum of 10 years.

Group plans
Also called Group Scholarship RESPS, this plan involves pulling individual contributors of RESP together into one pooled group plan. The interest left behind from the cancelled RESPS is paid out together with the matured plans. This is very advantageous especially on the parent’s side.