Is an RESP the best investment option for my young child?
Which investment option is the best for your child’s future?
Public Provident Fund (PPF)
If you open a PPF account when your child is small then in 15 years the PPF scheme will mature and the accumulated fund can be used to fulfill the requirements of the child, like financing the higher education, marriage, etc.
What are the disadvantages of an RESP?
Disadvantages of an RESP
The biggest disadvantage of an RESP is that any earnings that are withdrawn but not used for post-secondary education incur a twenty percent penalty, and income taxes must be paid on the money.
What is the best option for RESP?
Perhaps the greatest benefit of an RESP is the ‘free’ grant money you get from the government known as the Canada Education Savings Grant (CESG). You get a 20% matching grant on your RESP contributions up to $500 each year, and up to $7,200 in lifetime benefits.
Is it better to contribute to TFSA or RESP?
So, RESP vs. TFSA – which one to choose? If you’re saving money specifically for a child’s education, an RESP is almost always the best choice. It allows you to earn grant money that’s not otherwise available, and it allows you to defer taxes on any money earned in the account.
What is the best policy for child?
Best Child Insurance Plans in India
| Child Plans | Entry Age | Minimum Annual Premium |
|---|---|---|
| Future Generali Assured Education Plan (Child Education Plan) | 21-50 years | Rs. 20,000/- |
| HDFC SL YoungStar Super Premium | 18-65 years | Rs. 15,000/- |
| ICICI Pru Smart kid Assure plan | 20-54 years | Rs. 48,000/- |
| IndiaFirst Happy India Plan | 18-50 years | Rs. 12,000/- |
Which scheme is best for boy child?
List of 6 Best Post Office Saving Schemes for Boy Child in India 2022
- Ponmagan Podhuvaippu Nidhi Scheme.
- Kisan Vikas Patra (KVP)
- Post Office Monthly Income Scheme (POMIS)
- Post Office Recurring Deposit.
- Public Provident Fund (PPF)
- National Savings Certificate (NSC)
Why is RESP not good?
Unlike an RRSP, there is no deduction.” The drawback with an RESP comes if your kid decides not to attend college or university, which means the government will get back its share, including any investment made off that portion. Of course, you get to keep your own funds and any money made of those.
Can you lose money in a RESP?
The first is that RESPs are no place for risky investments. The second is that, even if you lose money in an RESP, the full amount of the grants is still taxable when you start making withdrawals.
Can RESP be use to buy a house?
The money can be used to start a business, buy a house, used for travel after school or for education. Quite frankly, it can be used for anything.
Are RESPs worth it?
Parents believe that, on average, their RESP will be worth almost $28,500 when their children need it, a recent RBC survey revealed. But, as most parents start RESPs when their child is 2 years old, their RESP will typically be worth $22,500 by the time their child is 17 — a shortfall of $8,000.
When should you begin to invest in an RESP?
An RESP is the best way to save for your child’s post-secondary education, and ideally, you should start one when your child is still a baby, and contribute $2,500 per year.
Can I buy a car with RESP money?
Education-related expenses
You don’t have to specify how the money will be used or submit receipts (but keep them in case there are questions). So if your child needs a car to get to classes, you can use RESP money to pay for it, along with insurance, gas, parking and maintenance.
How much should I put in my RESP per month?
Starting an RESP account is ideal and contributing about $2,500 per year per child—or $208.33 per month—would be optimal said financial advisor Derek Moran. “The sooner they start, the easier it is to accumulate a reasonable amount,” he said. “With accumulation of wealth, time is always a significant factor.”
How do I maximize my RESP grant?
In summary, in order to maximize the RESP grant limit, you will need to contribute the maximum each year, which is $2500 per year, and then $500 will be deposited into your RESP account right away via the RESP grant.
What age do RESP grants stop?
You can contribute to an RESP for up to 31 years, and the plan can remain open for a maximum of 35 years. Under the CESG, the government matches 20% on the first $2,500 contributed annually to an RESP, to a maximum of $500 per beneficiary per year. The lifetime maximum per beneficiary is $7,200, up to age 18.
Should I max out RESP?
For most people there isn’t much point in contributing more money than is necessary to max out the grants. Without the sweetener of RESP grants, you’re generally better off doing something else with the money if you have any debts, or unused TFSA or RRSP contribution room.
How much does government match for RESP?
20%
The RESP can hold a variety of investments including cash, GICs, and mutual funds, which can grow tax-deferred Your contributions to the RESP can be matched by the federal government through the Canada Education Savings Grant (CESG). This grant matches 20% of your contributions up to $2,500 each year.
What is the 16 17 rule for RESP?
If a beneficiary is turning 16 and 17 in the current calendar year, they are eligible for the CESG if one of two conditions is met: A minimum of $2,000 worth of contributions was made, and not withdrawn from an RESP, on behalf of the beneficiary before the end of the calendar year in which the beneficiary turned 15.
How much can you withdraw from RESP per year?
What is the maximum RESP withdrawal amount? There is no limit on the amount of PSE contributions that can be withdrawn. EAP withdrawals have a $5,000 limit (or $2,500 if the student is enrolled part-time) during the first 13 weeks of schooling. Once the 13 weeks have passed, any amount of EAP can be withdrawn.
Can a child open their own RESP?
Kids can contribute to their own RESP
However, starting at a very young age, money given or gifted to your children and funds they earn once old enough to work can all be contributed to their own RESP.
What is the interest rate on an RESP?
Invest Regularly
Based on 6.26% average annualized and includes Canada Education Savings Grant (CESG) payments.
Does RESP count as income?
An RESP is considered an educational assistance plan and the interest you receive from it must be shown on your tax return as income earned. The carrier of the RESP sends you a T4A that shows the amount you received. You are entitled to receive RESP payments for up to six months after you leave school.