Investing In Learning

One of the smartest decisions you can make is to start planning now for your children's future education needs. Specifically, their post-secondary education. After all, there's no denying the facts, the cost of post-secondary education is continually rising. It's becoming increasingly important to have a post-secondary education, while at the same time there are less government funds available for loans and scholarships.

A Registered Education Savings Plan, better known as an RESP is the government's way of helping you help your children. It is a vehicle used to save for your children's post secondary education. There is a lifetime limit of $50,000 per child (beneficiary). And when it comes to contributing, you're not alone, grandparents, relatives and friends may also be able to contribute to your child's RESP.

There are many benefits of RESPs. Firstly, you will appreciate that an RESP allows you to retain ownership of the funds. You - and not your children - have complete discretion over the entire plan.

Secondly, you'll enjoy the tax-deferral opportunity afforded by RESPs. When you contribute to an RESP, taxes on income are deferred until the funds are withdrawn. When the funds are eventually withdrawn, the accumulated income is taxed in your children's hands - in their lower or non-existent tax bracket. The only requirement is that your children use the funds for qualifying post-secondary schooling. The federal government also provides the Canada Education Savings Grant (CESG) as an enhancement to RESPs.

Through the CESG, the federal government will provide a grant equal to 20 percent of your first $2,500 in contributions made on behalf of an eligible beneficiary each year. The yearly grant maximum is $500 per beneficiary with a lifetime maximum grant amount of $7,200. Another advantage is that you can withdraw your contribution portion of the RESP tax-free at any time, since your contributions were made with after-tax dollars and were not tax-deductible.

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The information contained herein is considered accurate at the time of posting. CIBC and CIBC World Markets Inc. reserve the right to change any of it without prior notice. It is for general information purposes only.