It’s amazing to think that so much detail goes into something so simplistic- an account that can be paid into or withdrawn from. The entire process is so well thought out and fixed that you would be baffled at how much effort goes into your child’s future. Don’t believe us? Take a look at some more of the things you need to know about your money and the RESP account.
Now that you’re aware of the basics of the system, including how the grants work and how much contribution room there is, there are still some other things you don’t even know yet! Have you ever heard of the Enhanced CESG? Well it may save you from a life time of debt. Families with income below $41 000 a year are eligible for bigger grants- up to $600 per year. But just like a TV commercial it just doesn’t end there. If your family income is between $41 000 and $82 000 a year, you are still eligible for a bigger grant at $550 per year. This enables everyone to be able to save to make their kids’ futures amazing. Just bear in mind that those salaries are estimates, and can change every year, so make sure to stay up to date.
Another thing you may not have been aware of is that the RESP cut off for contributions is by the end of the year, and no, you won’t be given some extra time to make it. This is super important, so make sure that your payments and contributions are always on time, or else you’ll have to catch up the following year.
There are a lot of common questions about the RESP accounts, like for how long they can stay open. Well, the maximum time it can stay open is for 36 years, or until the maximum amount of $50 000 has been paid into the account. This gives you plenty of time to save and plan. Another common question is how money in the account works, and we have a quick summary. There are two types of funds in the account, with the first obviously being the payments you make. The second type is called “accumulated income” and this part is all the grants and growth in the account. So when you withdraw any money from the account, you will be asked to specify how much you would like to withdraw from contributions and how much from accumulated income.
The other great concern is taxes. But the RESP accounts are very clear and open about what is taxed and when. Basically, contributions are not taxed, but the grants and accumulated income is when the student uses it. The tax is also a small amount, since everyone knows that students are generally dirt poor! When you need your money, the maximum that can be withdrawn in the first semester of schooling is $5000. If more is needed, a special request needs to be sent in order to obtain it. Remember that if this happens, or you need a withdrawal, the only person who can withdraw from the account is the main contributor, most likely a guardian or parent.