How Do The Government Grants Help Your Registered Education Savings Plan Grow?
The idea of raising thousands of dollars for your child’s university education can be a frightening one. Luckily,opening a Registered Education Savings Plan can help you raise that money. Through investing in such an account, your deposits can earn interest. Not only that, but government grants are in place to match your giving and give you even more money to work with. How can these grants help your RESP grow?
1. They Provide Cash To Your Account
The very basic way that government grants helps your RESP to grow is that they provide cold, hard cash directly to your account. If you get the Child Benefit in your taxes, you are eligible for $1,000 clear and away due to a Canada Learning Bond (CLB). For the first $2,500 that you are able to save, Canada will match those funds at 20% through the so-called Canada Education Savings Grant (CESG) trough Heritage RESP. If you don’t make much money, additional matching is done. There are caps for these grants, but they can total up to more than $7,000 for one student.
These are just a couple of the government grants out there that will help fund your RESP. Provincial grants may also be available to you, depending on where you live.
As a result of these deposits into your account, you can rest a little easier when you think about how you can fund your child’s future education.
2. Because There Is More Money Deposited, Returns Are Higher
When you first open the RESP account, you’ll have to determine what kind of account you want it to be. It can be a straightforward savings account, a guaranteed investment certificate (GIC) with a low interest rate, or you can opt to invest your deposits into different mutual funds. All of these will offer you different returns on your money.
Generally, having more money to work with will allow your RESP to receive greater returns. With the additional monetary power that your RESP has thanks to government grants, any yields you earn will be bigger than if you were investing only your money. Your investments will return even more money to your RESP.
Government grants can put more money into your RESP and that money will multiply over time. Make sure you sit down with your investment advisor to figure out which plan makes the most sense to you.