Notes

Max out Education Savings

Content of the article Canadians have a variety of investment vehicles at their disposal that range from Retirement Savings Plans (RSPs) to Registered Education Savings Plans (RESPs) and more recent Tax Free Savings Accounts (TFSAs). These tools are excellent when used in isolation however they can be combined to accomplish more.



Article content Parents who are planning their the education of their children should take note. Parents can increase the funding for their children's education by combining the advantages of RRSPs as well as TFSAs and RESPs.



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Imagine the scenario of an Ontario investor who makes $100,000 per year and contributes $14,000 to an RRSP. The investor could save $6,077 in the event that the RRSP contribution was fully deductible.



The money that has grown tax-free in the TFSA can be deposited into the child's RESP where it can earn interest tax-free and be eligible for cash contributions from the government. EXTREMEMINING The Canada Education Savings Grant (CESG), a grant of 20% would be given to the RESP. The grant could be as high as $500 per year for each RESP beneficiary under 18 with the maximum benefit for life at $7,200.



Article content Parents should file tax returns on behalf of their children as soon as possible. Even if it's a few hundred dollars from baby-sitting or an online route one, they should file it as soon as they can. There are two major benefits. The primary benefit is that the child starts to accumulate RRSP contribution space that can be utilized later in their lives when they need the tax deduction.



Then, when the child turns 19 because they have completed the application, they will be eligible to apply for the GST/HST Credit that produces quarterly payments from the government. You can also add the credits to your education savings.



If the child was fortunate enough through high school to have sufficient earnings from summer jobs or in a family business which made contributing to an RRSP logical, it can aid in their education funding. If an RESP does not provide sufficient funding for education, RRSP contributions can easily be removed without penalty through the Lifelong Learning Plan.



Article content In the end, the investor has benefited substantially by accumulating their retirement savings through their RRSP and receiving an income tax refund, and having it grow tax-free in their TFSA; and ultimately investing in an RESP that has generated no-cost money through the federal government's CESG program.



Kim Inglis is an Investment Advisor, CIM with Canaccord Wealth Management, a division of Canaccord Genuity Corp.Kim can be reached at www.reynoldsinglis.ca.


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