Paying for college is becoming more difficult all the time, but fortunately there are now easy ways to save for your child’s education. A government-sponsored Registered Education Savings Plan (heritage RESP) allows you to start saving money for your children’s education as soon as they are born. The plans are simple to start and also reduce a lot of your stress in this area. Below are five of the main advantages of these types of savings plans.
1. There Are Choices in Investment Options
With a RESP, you can choose from among various types of investments, including mutual funds, GICs, and of course, stocks and bonds. This is similar to the rules for a TFSA or RRSP. Depending on the type of plan you choose, this means you can choose your investment options based on risk tolerance or even a certain objective. Above all else, it means you can feel more in control over your savings plan.
2. It Is an Extremely Easy Way to Save
With RESPs, you save money over time, and it is much less painful financially to do it this way. In addition, there is always the possibility that you could receive more government grants and money in other forms along the way, which means the amount of money you end up saving is likely to be bigger than you’d planned.
3. Government Grants Help Your Savings Efforts
Because of the way they are set up, RESPs come with the potential of getting various types of government grants that complement the money you’re already depositing into the account. This means that in addition to your own contributions, you also get “free” money from the government, which helps your savings account grow even faster throughout the years. Because of this, it is a good idea to continuously check the government websites in case any new opportunities for funding pop up along the way.
4. Anyone Can Contribute to the Plan
A Registered Heritage Education Savings Plan is set up so that anyone can add to the account. If you have a friend or family member who would like to make a donation to your RESP, they can do so. There are also group and family RESPs that you can create, allowing for many different ways to save for your child’s college education. You can easily donate to someone else’s account as well, because the accounts make it easy to donate to anyone you wish.
5. There Are Tax Advantages to Having a RESP
Finally, RESPs offer a great tax-free opportunity that can save you a lot of money at tax time. The money you contribute to the RESP is tax-free, and even though the money is taxable once it is being used, most students are in such low tax brackets that it won’t cost them much. The fact that the contributions are tax-free also allows for the money to build up a lot faster, so over time you’ll be surprised by the amount of money that is in your account.