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Maximize Your Education Savings

Article content Canadians have a variety of investment options at their disposal which range from Retirement Savings Plans (RSPs) to Registered Education Savings Plans (RESPs), and the more recent Tax Free Savings Accounts (TFSAs). If used as a set, the tools of this collection provide excellent options but, when used in combination, they can do much more.



Article content Parents who are planning their children's education should take particular note. Parents can boost the amount of money they allocate to their children's education by combining the advantages of RRSPs as well as TFSAs and RESPs.



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Imagine an Ontario investor earning $100,000 a year, who contributes $14,000 to an RRSP. The investor would save approximately $6,077 if the RRSP contribution was fully tax-deductible.



The money that is growing tax-free in the TFSA can be put into the child's RESP so that it will earn interest tax-free and be eligible for cash contributions from the government. extrememining.net The Canada Education Savings Grant (CESG) grants 20% will be made to the RESP. This grant could be as high as $500 per year for each RESP beneficiary under 18 years old, with the maximum benefit for life at $7,200.



Article content Parents should begin as early as possible to file tax returns for children, even if it's just a few hundred dollars earned from baby-sitting or a paper route. There are two benefits. The first is that the child begins building up RRSP contribution space and can use it later in life when they need the tax deduction.



The second option is if the child is 19 years old old, and they have completed their tax return, they may apply for the GST/HST tax credit, which generates quarterly payments to the government. The credit can be added to savings for education.



If the child was fortunate throughout high school to have enough earnings from summer jobs or working in a family-owned company that made contributions to an RRSP sensible, it could aid in their education funding. If an RESP doesn't provide enough education funds, RRSP contributions can easily be withdrawn without penalty by using the Lifelong Learning Plan.



Article content The investor has benefited greatly from a rise in their retirement savings via their RRSP, receiving an income tax refund that can invest tax-free in TFSA and then subsequently investing in an RESP which generates free cash 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.


Here's my website: https://extrememining.net/