On becoming a new parent, friends and relatives celebrate with you. However, life goes back to normal shortly, and the reality of new parental responsibilities dawns on you. You are left wondering whether you are prepared to face the challenge. Many thoughts will cross your mind, among them being the child’s education. You will realize that in a few years, you will require funds to cater for your child’s education.
RESP is a solution to the question about your child’s education. Government grants characterize it, and it is a tax-free saving plan. Do not be worried about the process of investing in the plan, the kind of RESPs to consider, and the amount to spend. This article outlines the types of RESP options that are available for you.
In this type of RESP, the subscriber chooses the contribution amount that complies with income tax act limits and the educational assistance payment timings. In case the beneficiary does not pursue tertiary education, the funds can be transferred to another beneficiary provided the contract permits. There are two types of family plans:
- Individual Non-Family Plan
These are programs where one can invest in one beneficiary. It is not compulsory to have parental ties, and thus, people can invest funds for a child other than theirs.
In this plan, you can have either one or several beneficiaries. The beneficiary must have blood ties with the subscriber.
This plan is similar to the individual non-family plan. However, in this case, the contribution amount is based on the number of shares and the beneficiary’s age when the contract is signed. If one terminates the contract before maturity, the income generated will not be reimbursed. Instead, it will be distributed to other beneficiaries in the same group.
New parents are now informed. They should make the right decisions for their children’s education.