Reinvesting your Tax Refund in an RESP: A Smart Move for the Future!
May 9, 2013
Those of you who invested in an RRSP last year are likely to receive a tax refund in the next few weeks, if not already. Have you considered reinvesting this amount in a registered education savings plan (RESP)? This initiative could really pay off in the long run, and bring your children one step closer to achieving their dreams!
Too few parents are aware that the federal and Quebec governments provide generous grants and incentives for children with RESPs. Indeed, every dollar invested can be increased by 30% to 60 %1, based on family income. This amount could reach a total of $12,8001 per child. We're talking about a sum of $9001 in 2013 alone.
That's right, the federal and Quebec governments help finance your child's education; it's that simple! Here's a quick overview of the amounts your child could be entitled to:
Government of Canada
- Canada Education Savings Grant (CESG): a 20 % to 40 % increase on the invested amounts, up to $7,200 per child based on net family income. This grant is offered to all Canadian children with an RESP.
- Canada Learning Bond (CLB): a grant totalling up to $2,0002 per child. Only offered to low-income families.
Government of Quebec
- Quebec Education Savings Incentive (QESI): a 10 % to 20 %1 increase on the invested amounts, up to $3,600 $1 per child based on net family income. This grant is offered to all children residing in the province of Quebec with an RESP.
Remember that unlike an RRSP, there is no deadline to invest in an RESP; however, the annual limit for subsidized contributions ends on December 31. It is therefore beneficial to contribute the maximum amount that can be subsidized in a given year to fully benefit from the grants and incentives available. Furthermore, by starting to invest during your child's early years, from birth if possible, you also maximize the grants and incentives offered.
Lastly, when your RESP reaches maturity, your capital will be returned to you 100%. You can then invest this amount in your RRSP and enjoy the benefits of both the RESP and RRSP.
If you want to get the most out of your tax refund by reinvesting it in an RESP, contact your scholarship plan representative.
1The Canada Education Savings Grant (CESG) is equal to 20% to 40%. The Quebec Education Savings Incentive (QESI) is equal to 10% to 20%. The lifetime CESG limit is set at $7,200 and at $3,600 for the QESI. Amounts based on net family income; certain conditions apply.
2For a child born after December 31, 2003 whose family receives the National Child Benefit Supplement (NCBS).