WHAT ARE RESPS ?

Information about Registered Education Savings Plans:

RESPs are Registered Education Savings Plans; a Canadian Government initiative to assist parents, grandparents, relatives or friends, fund a child's post-secondary education.

The child ( beneficiary ) must be a resident of Canada, have a social insurance number, and be under 18 years of age.

The Canadian Government's Budget of 2004 introduced steps to help low and middle-income families save for their children's college or university.

A $500 Canada Learning Bond will be provided at birth for children in families that are entitled to the National Child Benefit ( NCB ) supplement - generally families with incomes under $35,000.

As part of a new program the Canada Learning Bond ( CLB ), will provide up to $2,000 for children born after 2003 in families eligable for the National Child Benefit supplement. These children will qualify for $100 CLB instalments to the age 15, in each year their family is entitled to the NCB supplement.

The CLB will be paid into a registered education savings plan ( RESP ) established by the family for the child's post-secondary education. An additional $25 will be paid with the initial $500 bond to cover the cost of establishing an RESP.

For every $100 contributed to an RESP, Canada provides a $20 grant, the Canada Education Savings Grant (CESG). It can total up to $400 a year for each child.

The advantage Registered Education Savings Plans ( RESPS ) have over other investments, is the Canadian Government will add a yearly grant of 20% on top of your investment money. The maximum grant is $400.00 for each child, for every year of the plan; attained with an investment of $2,000.00 per year.

This 20% matching rate is doubled to 40% for families with incomes up to $35,000. It also increases the rate to 30% for families with incomes between $35,000 and $70,000. These enhanced CESG rates will apply to the first $500 contributed in a year to a child's RESP.

Funds deposited in Registered Education Savings Plans ( RESPS ) grow tax free.

The Canada Learning Bond also provides a new up-front grant of up to $3,000 for first year post-secondary dependent students from low-income families.

The Program also Provides an annual up-front grant of up to $2,000 for eligible students with disabilities.

There are many different types of Registered Education Savings Plans ( RESPS ); a parent can enter into a RESP on a monthly basis, or as intermittent contributions. The subscriber is not obligated to maintain any particular pattern of monthly payments under RESP rules.

A self-directed Registered Education Savings Plan ( RESP ) allows a subscriber to choose which investments will be included in the RESP ( unlike Registered Retirement Savings Plans ( RRSPS ), RESPs have no foreign content limits ).

OR

A subscriber can choose a Registered Education Savings Plan ( RESP ) which combines his or her contributions with that, of all other subscribers. The investment decisions are made by the subscriber's financial institution.

Should the beneficiary decide not to attend a post-secondary institution, the funds from the Registered Education Savings Plan ( RESP ) can be transfered to a brother or sister under the age of 21.

The subscriber may transfer the funds from an RESP to a Registered Retirement Savings Plan ( RRSP ) - to a maximum of $50,000.00. The funds may also be transfered to a spousal RRSP. In such cases the grant portion of the money in the RESP is returned to the Canadian Government.

When the beneficiary enrolls in a post-secondary institution as a full time student the RESP can begin making payments to the student. Payments can go towards the student's tuition, books, accommodations and transportation.

The federal loan ceiling for Canada Student Loans will be increased to $210 from $165 a week.

The Canadian Government estimated that in 2000-01, 60% of students had a federal or provincial student loan. The Canada Learning Bond 2004

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