Becoming a grandparent is almost as exciting as becoming a parent. Seeing your children start their own family stirs all kinds of emotions, and you’ll be naturally inclined to lend them a hand. This help can take many forms, like babysitting from time to time or preparing an abundance of homemade meals.
And as a grandparent, you’ll also probably be thinking about the future; parenthood has taught you that! That’s why you might want to pitch in for your grandchildren’s education in your own way. To do so, opening an RESP as a grandparent is a great starting point!
After all, the registered education savings plan, or RESP, allows you to set some money aside for the little ones’ post-secondary education, as soon as they’re born.
The main perk of the RESP is the government grants which boost your savings.
For each dollar paid into the account, the Government of Canada and the Government of Quebec add grants corresponding to at least $0.20 and $0.10, respectively1.
For example, if a parent or grandparent invests $100 per month for 6 years ($7,200), the government grants will amount to $1,440 and $720, respectively, for a total of $9,360.
In addition to the Quebec Education Savings Incentive (QESI) at the provincial level and the Canada Education Savings Grant (CESG) at the federal level, your grandchild could be eligible for the Canada Learning Bond (CLB), a grant for low-income families. Up to $2,0002 could be deposited in your RESP thanks to the CLB!
Another significant advantage of the RESP is that the money invested in the RESP grows tax-free.
Grandparents can open an RESP for their grandson or granddaughter, even if he or she already has an RESP, since a child can be the beneficiary of more than one plan. For instance, the parents can be the subscribers of an RESP and the grandparents the subscribers of another one. This way, grandparents increase the possibility of receiving the maximum amount in grants available for their grandchildren.
If several subscribers open an RESP for a same beneficiary, it’s important that the family communicates efficiently to avoid contributing more than $2,500 per year. Any additional amount simply wouldn’t attract grants.
In addition, if the family contributes too much in different RESPs, the subscribers risk exceeding the $50,000 lifetime contribution limit and having to pay a tax of 1% per month on excess contributions.
That’s when the Kaleido team comes into play. With Kaleido, your savings project is in good hands as the RESP has been their area of expertise since 1964.
In a nutshell, grandparents can pitch in for their grandchildren’s education by contributing to an RESP. Your grandchildren will certainly be happy to know their family is providing financial support and they’ll be able to focus more on school!
1. Canada Education Savings Grant (CESG) from 20 to 40% and Quebec Education Savings Incentive (QESI) from 10 to 20%. Based on adjusted family net income. The annual limit is set at $600 for the CESG and at $300 for the QESI. The lifetime limit per beneficiary is set at $7,200 for the CESG and at $3,600 for the QESI. The Canada Learning Bond (CLB) is up to $2,000 per beneficiary and is offered for children born after December 31, 2003, from families who meet the financial criteria. Certain conditions apply; see our prospectus.
2. For a child born after December 31, 2003, from a financially eligible family. CLB Eligibility is reviewed yearly.