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The costs of post-secondary education, however, are continually rising. According to Statistics Canada, one year of university can cost up to $13,000. Moreover, these costs are currently increasing faster than the inflation rate. What would that be in 10 or 15 years?
A registered education savings plan (RESP) is an excellent opportunity for a service offer. Highlight the benefits of contributing to an RESP, as outlined below:
- Government subsidies
- The Canada Education Savings Grant (CESG)
- Up to $7,200 per beneficiary
- The Canada Learning Bond (CLB) for low-income families
- Up to $2,000 per beneficiary
- The Alberta Centennial Education Savings Plan (ACES) (for residents of Alberta)
- Up to $800 per beneficiary
- The Quebec Education Savings Incentive (QESI) (for Quebec residents)
- Up to $3,600 per beneficiary
Tax-exempt funding
Only investment income and the subsidies received are taxable, and only for the child, once he or she cashes in RESP income.
Contributions of up to $50,000 per beneficiary are possible.
Lump-sum amounts
Option of contributing lump-sum amounts or creating a regular savings program through a PAC to take advantage of dollar cost averaging..
Annual CESGs and QESIs accumulate when not used.
Industrial Alliance Group offers two education savings products. This means you can choose the RESP that best meets the needs for your clients. The DIPLOMA and MY EDUCATION RESPs are outstanding tools to enable parents to immediately begin building a promising future for their children.
- DIPLOMA, for a comprehensive solution
- Monthly contribution program, through pre-authorized contributions (PAC)
- Education bonus paid at the end of the PAC program (up to a maximum of 15% of contributions)
- Possibility of contributing lump-sum amounts
- Worry-free administration due to asset allocation based on recipient's age
- MY EDUCATION, for personalized management
- Option of selecting an individual or family plan
- Possibility of investing in a wide array of funds
- Amount and frequency of payments left to the client's discretion
- Government subsidies
- Face amount guaranteed 100% at term*
- Option of changing the beneficiary
- Possibility of obtaining an advance on RESP contract to maximize subsidies
- Option of insuring PAC payments as a protection against subscriber death (CDA) or disability (CIA)
*75% if the subscriber is 72 years of age or older
Because a picture is worth a thousand words, we have provided an example below to show parents how much they can gain by contributing to an RESP for their child.
Example :
Karen and her family are Manitoba residents. Karen was born in 2007 and her parents subscribed to a My Education RESP for her in 2008. They want to contribute the minimum amount required to benefit from maximum subsidies. Their 2007 household income was $65,000. Below is a chart indicating the amounts that could be accumulated for Karen's education with an average annual return of 5%.
| Year |
Age |
Contri-bution |
CESG |
Total with return |
Year |
Age |
Contri-bution |
CESG |
Total with return |
| 2008 |
1 |
2,500 |
500 |
3,150.00(1) |
2017 |
10 |
2,500 |
500 |
39,620.36 |
| 2009 |
2 |
2,500 |
500 |
6,457.50(2) |
2018 |
11 |
2,500 |
500 |
44,751.38 |
| 2010 |
3 |
2,500 |
500 |
9,930.38 |
2019 |
12 |
2,500 |
500 |
50,138.95 |
| 2011 |
4 |
2,500 |
500 |
13,576.89 |
2020 |
13 |
2,500 |
500 |
55,795.90 |
| 2012 |
5 |
2,500 |
500 |
17,405.74 |
2021 |
14 |
2,500 |
500 |
61,735.69 |
| 2013 |
6 |
2,500 |
500 |
21,426.03 |
2022 |
15 |
1,000 |
200 |
66,082.48 |
| 2014 |
7 |
2,500 |
500 |
25,647.33 |
2023 |
16 |
0(3) |
N/A(4) |
69,386.60 |
| 2015 |
8 |
2,500 |
500 |
30,079.69 |
2024 |
17 |
0(3) |
N/A(4) |
72,855.93 |
| 2016 |
9 |
2,500 |
500 |
34,733.68 |
Total |
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36,000 |
7,200 |
72,855.93 |
1) ($2,500 + $500) x 1.05
2) ($3,150 + 2,500$ + $500) x 1.05
3) Karen's parents chose to stop contributing, given that they had reached their objective of obtaining the maximum possible subsidies. They could nonetheless have kept up their contributions to benefit from the tax exemptions.
4)No other CESG is allowed, given that the cumulative ceiling has been reached.
Karen's parents followed all of the keys to success:
- Beginning to contribute early
- Contributing each year
- Maximizing the subsidies
- Taking advantage of saving exempt from income taxes
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