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Funding a post-secondary education
There are only so many ways to save and pay for a child’s post-secondary education. And
the costs of education are rising every year. If you have a young child, the
costs easily could double from today’s level by the time your child is ready
for post-secondary education.
Will you be financially ready?
If you are lucky, your child will receive financial aid simply on merit.
Otherwise, the burden falls on familiar shoulders: you and your child. You may
have to borrow to pay the bills. Or you could be saving right now.
The wisest course is to save in advance for all or a substantial part of those
costs. Like many other forms of providing funds today to pay for future
expenses, the earlier you start putting money away, the more it accumulates.
The federal government provides a stimulus for saving for educational purposes
by allowing Registered Education Savings Plans (RESPs). You may contribute up to $4,000 annually into an RESP for a maximum
of 21 years or to a maximum of $42,000 whichever comes first.
Benefits
Money accumulates in the RESP tax-deferred, for up to 25 years. By regulation
you have until your child's 25th birthday to use up the RESP
money. This can be helpful and flexible in cases where the beneficiary decides
not to attend school immediately after graduating high school. For example, the
beneficiary could be changed to a younger person now ready to attend
post-secondary school. Or the funds can be transferred to another RESP.
Money taken out of the RESP for education purposes is regarded as income to the
student, usually at a much lower tax rate than the parent who put it in. This is
because the student will probably have a lower level of income.
Who can set up a plan
A father, a mother, a grandparent, an aunt, an uncle, a friend. The person who
is going to use the money is called the "beneficiary". The person who sets up
and contributes to the plan is the "subscriber". The subscriber names the
beneficiary of the RESP. If related by blood, the plan is a Family Plan. If not
related, it is a Non-Family Plan.
Qualifying post-secondary educational institutions, in Canada or abroad:
- Universities
- Community colleges
- Junior colleges
- Specialized training schools
Eligible investments
With Foresters Securities, customers can select from a variety of mutual funds*
for their child's RESP.
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