What is RESP savings account?

A Registered Education Savings Plan (RESP) is a special savings account for parents who want to save for their child’s education after high school.

What are the disadvantages of a RESP?

Disadvantages of an RESP The biggest disadvantage of an RESP is that any earnings that are withdrawn but not used for post-secondary education incur a twenty percent penalty, and income taxes must be paid on the money.

What are the benefits of saving money in an RESP?

6 reasons to open an RESP

  • Government grants.
  • RESP savings grow tax free.
  • EAPs are taxable in the hands of the student.
  • A variety of investment options.
  • Friends and family can contribute.
  • RESP accounts can stay open for 36 years.

Is it better to invest in RESP or TFSA?

TFSA – which one to choose? If you’re saving money specifically for a child’s education, an RESP is almost always the best choice. It allows you to earn grant money that’s not otherwise available, and it allows you to defer taxes on any money earned in the account.

How much is RESP per year?

RESP Contribution Rules & Limits There is no annual RESP contribution limit. However, to maximize your potential annual CESG grant of $500, it’s recommended that you contribute up to $2,500 to your RESP per beneficiary per year. Keep in mind that the lifetime contribution limit for any one beneficiary is $50,000.

Are RESPs worth it?

Parents believe that, on average, their RESP will be worth almost $28,500 when their children need it, a recent RBC survey revealed. But, as most parents start RESPs when their child is 2 years old, their RESP will typically be worth $22,500 by the time their child is 17 — a shortfall of $8,000.

Why is RESP not good?

Unlike an RRSP, there is no deduction.” The drawback with an RESP comes if your kid decides not to attend college or university, which means the government will get back its share, including any investment made off that portion. Of course, you get to keep your own funds and any money made of those.

Can you lose money in RESP?

As a result, parents lose a chunk of their money right out of the gate. What’s more, the rules on contributions and withdrawals are complex and restrictive, and there are stiff penalties for leaving the plan early. In extreme cases, parents have lost all of their RESP savings.

How much should I put in my RESP?

How much should I put in my RESP per month?

$208.33 per month
When do I start? You hear it all the time, but experts say the sooner you save, the better. Starting an RESP account is ideal and contributing about $2,500 per year per child—or $208.33 per month—would be optimal said financial advisor Derek Moran.

Can you lose money in an RESP?

How much should I put into an RESP?