Saving For Education
Saving for education is different than saving for retirement - the time you have to save is much shorter. It's important to get started.The road to a post-secondary education may be traveled with the help of two investment vehicles, the Registered Education Savings Plan (RESP) or the In-Trust Account.
The Registered Education Savings Plan.
Parents or grandparents can contribute up to $4,000 a year to an RESP account for each child. These contributions qualify for the Canada Education Savings Grant (CESG) which amounts to 20% of the annual contribution to a maximum of $400 per year per child. In other words, for each $2,000 deposited to an RESP account, the federal government will add $400. The funds accumulated in an RESP must be used to cover education related costs such as tuition, housing, transportation, books and supplies. If the child decides not to further his/her education, the grants and investment earnings on the grants must be repaid
The In-Trust Account.
With an in-trust account the parents contribute and manage the money for the child until he or she reaches age 18. There is no limit to how much you can contribute and the money may be used for anything but no grants are available.
There are complex tax issues associated these accounts. Individuals interested in establishing an RESP or an in-trust account should consult a qualified investment professional.
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