Accountant Explains (CPA): How to Maximize RESP in Canada - Tax Free Investing

An RESP stands for Registered Educations Savings Plan, which is a tax-sheltered plan offered by the government that helps you save for a child’s post-secondary education faster. RESPs allow you to get free money from the government and your savings grow tax free if they stay in the plan

• What is an RESP and how does it work?
• How much money does the government contribute to an RESP
• How much money do you get from an RESP
• Can you lose money in an RESP?

The main benefit of an RESP is its tax-advantaged nature. You can potentially save thousands or even tens of thousands of taxes when investing for a child’s education through a RESP. If you follow the steps and concepts outlined in this video, when your child uses their RESP for school, they may end up having to pay little or no tax at all.

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0:00 Intro
0:22 What is an RRSP
1:12 Types of RESPs
2:58 Benefits of an RESP
5:59 Limitations of an RESP
8:00 How to Withdraw from an RESP
9:28 RESP vs TFSA vs RRSP
10:41 How to open an RESP

One of the major limitations of the RESP has to do with the government grant, regardless of a family’s income, no child can collect more than $7,200 from the CESG. The subscriber (or a person acting for the subscriber) generally makes contributions to the RESP. Subscribers cannot deduct their contributions from their income on their Income Tax and Benefit Return

The Canada Revenue Agency registers the education savings plan contract as an RESP, and lifetime limits are set by the Income Tax Act on the amount that can be contributed for each beneficiary. You can open an RESP without having a bank account

Anyone can open an RESP account for a child—parents, guardians, grandparents, other relatives, or friends. You can make contributions into an RESP until 31 years after you first opened it. You can receive the Canada Education Savings Grant (CESG) only on the first $2,500 in contributions per year

Some types of RESPs have no minimum deposit requirements, while others do. Your money grows tax-free while it is in your RESP. You do not get a tax deduction for the money you put into an RESP. The RESP coupled with the Canada Child Benefit (CCB) can really help you for expensive child costs

While individual and family RESPs can be purchased through financial institutions such as a bank or credit union, group RESPs can only be purchased through a scholarship plan dealer, which are organizations that specialize in administering RESPs

When it comes to Investing in an RESP, you can invest in Stocks, ETFs, Mutual Funds, almost any time of investment. You can invest in an S&P 500 Index ETF, or you can choose the best dividend stocks to buy now. If funds are withdrawn from an RESP for purposes other than education, the Canada Education Savings Grant must be repaid to the government. The savings inside the RESP grow and no tax is paid on the gains until it’s time to withdraw

Once the child designated in the RESP is enrolled in a qualifying post-secondary school, you can start to take the money out. Fortunately, most students are in the lowest bracket, so there is typically little to no tax owing

Disclaimer: This channel is for education purposes only and opinions expressed in this video are based on personal research and should be treated as such. These are not instructions, suggestions, nor directions as to how to handle your money. The facts and figures presented in this video are up-to-date based on the recording. These may have changed based on when you watch the video, please, always do your own due diligence!
#RESP #TaxFreeInvesting #FreeMoney