Back to School: The Benefits of RESPs
With the new school year starting and kids heading back to the classroom, post-secondary education can be front of mind for many families. We thought it would be timely to highlight the Registered Education Savings Plan (RESP). The RESP is a registered account the government established to help families save for post-secondary education, including full or part-time studies at a trade school, college, university, or in an apprenticeship program inside or outside of Canada. Lists of qualified institutions can be found on the government of Canada website. RESPs are valuable tools to help save for a child’s education after high school. Several benefits of RESPs are highlighted below.
- Government Grants: The Canadian government provides a helping hand to RESP contributors through various grant programs. The Canada Education Savings Grant (CESG) matches 20% of your contributions, up to a maximum annual limit. Additionally, there’s 10% or 20% additional CESG on the first $500 or less of annual contributions for low-income families. The Canada Learning Bond (CLB) is also available for low-income families, offering an initial grant and subsequent yearly contributions. There are provincial grants as well, such as the BC Training and Education Savings Grant Program (BCTESG), available to eligible residents. The grants can significantly boost your RESP savings and can be invested alongside contributions.
- Tax Advantages: RESPs offer substantial tax benefits. Contributions made to an RESP are not tax-deductible, but the money grows and compounds tax-free within the plan. When the funds are withdrawn for educational purposes, they are taxed at the student’s lower tax rate, minimizing the family’s tax burden.
- Withdrawal Flexibility: When a withdrawal is made from the account and the beneficiary is enrolled in a qualified institution, the amount is not subject to restrictions. In other words, the withdrawal does not have to be put towards tuition or be constrained by school costs.
- Investments: Like all registered accounts, the RESP is a tax-advantageous vehicle for underlying investments. You can hold most qualified securities in the account, everything from savings accounts to individual stocks. The time horizon of RESPs is arguably more predictable than other accounts, allowing for more tailored investment tactics. When a beneficiary is young, more risk can be taken to make the most of long-term, tax-free growth.
- Peace of Mind: Perhaps the most valuable benefit of RESPs is the peace of mind they offer. With the rising costs of education, knowing that you have a dedicated savings plan in place can alleviate the stress associated with financing higher education.
“This means that” RESPs are powerful tools that can help families secure a bright future for their loved ones. The combination of government grants and tax benefits makes the RESP an attractive vehicle for parents looking to invest in their children’s education. As always, don’t hesitate to contact our team should you have further questions or would like to open an RESP. Pathfinder Main Telephone Line: 604 682-7312
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Changes in Leverage. We are increasing the asset ceiling to 2.0 times the market value of equity for Pathfinder International Fund and Pathfinder Real Fund to be consistent with Pathfinder Partners’ Fund and Pathfinder Resource Fund.
*All returns are time weighted and net of investment management fees. Returns from the Pathfinder Partners’ Fund and Partners’ Real Return Plus Fund are presented based on the masters series of each fund. The Pathfinder Core: Equity Portfolio and The Pathfinder Core: High Income Portfolio are live accounts. These are actual accounts owned by the Pathfinder Chairman (Equity) and client (High Income) which contain no legacy positions, cash flows or other Pathfinder investment mandates or products. Monthly inception dates for each fund and portfolio are as follows: Pathfinder Core: Equity Portfolio (January 2011), Pathfinder Core: High Income Portfolio (October 2012) Partners’ Fund (April 2011), Partners’ Real Return Plus Fund (April, 2013), and Partners’ Core Plus Fund (November 2014).
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