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.
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.
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 And when the funds are withdrawn for your kid’s education, they are only taxed in the student’s hands.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.
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.
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.
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.