Becoming a Parent Life events

Your family is expanding!

Having a child is one of the most momentous events of your life. But when it comes to providing for a child’s many needs, financial planning takes on new meaning for parents, who have access to various types of savings and government programs.

EDUCATION: THE RESP 

Contributing to the cost of a postsecondary education is one of the best presents you can give a child. The Registered Education Savings Plan (RESP) is a highly advantageous savings plan. Anyone – a parent, a grandparent, another member of the family or a friend – may contribute on behalf of a child. The contributions are not deductible but the accumulated income is tax-exempt as long as it remains in the RESP. When students begin their postsecondary studies, they will be taxed on withdrawals from their plans. But students generally have minimal income, so the tax payable – if any – should also be minimal. 

RESP: individuAl oR familY PLAN?

 

INDIVIDUAL resp

FAMILY RESP

BENEFICIARIES

A single beneficiary who does not have to be related to the subscriber

One or more beneficiaries who are related to the subscriber by blood or adoption 

age limit

No age limit

Beneficiaries must be under the age of 31

ALLOCATION AMONG  BENEFICIARIEs

Contributions, withdrawals and educational assistance payments are related to a single beneficiary

Contributions are allocated among the beneficiaries by the subscriber 

IF THE BENEFICIARY DECIDES NOT TO PURSUE A POSTSECONDARY EDUCATION

A new beneficiary may be designated

The other beneficiaries may benefit from the contributions

GOVERNMENT GRANTS  

Canada Education Savings Grant  (CESG) 
The CESG is equivalent to 20% of the first $2,500 of annual contributions; in other words, up to $500 per year per beneficiary. Additional grants are available for low- or medium-income families. The cumulative maximum amount that may be paid into an RESP is $7,200 per child. This limit includes the total amount of the basic CESG and additional grants.  

Canada Learning Bond (CLB)
The CLB provides a $500 grant the first year, paid into the RESP, and possibly additional payments of $100 a year for 15 years, to a maximum of $2,000 per child.

Québec Education Savings Incentive (QESI)
The Quebec government offers the QESI, a 10% tax credit to a maximum of $2,500, also paid into the child’s RESP.

CHILDREN WHO ELECT NOT TO ATTEND A POSTSECODARY INSTITUTION  

In the case of children who do not continue their education, the type of plan – individual or family – determines what happens to it. In the case of a family RESP, the accumulated amount may be used by another designated child. If there is no other beneficiary, the RESP will be dismantled and the original capital will be returned to the subscriber. Grants must be repaid to the various levels of government, however. The return earned on the funds may be remitted to the subscriber, subject to the rules governing RESPs.

INVESTMENTS 

An RESP may hold the same investments as an RRSP. Contact Services d'investissement FERIQUE to determine the investments that suit you.

CHILDCARE COSTS 

With the arrival of a child, you may claim various income-tax deductions. Childcare costs entitle you to a deduction of as much as $8,000 a year federally and a refundable tax credit of as much as $9,000 a year provincially. These limits are available to the parent with the lower income for children under the age of seven.

In Quebec, parental contributions to early childhood centres (ECCs) or school care centres are not tax-deductible. The income tax credits for childcare costs are determined by your net family income: the lower it is, the higher the credit. For children in an ECC, the additional contribution also depends on net family income; therefore, the lower it is, the more you save. Thus by contributing to your RRSP, you can lower your net family income, obtain tax savings and also decrease your childcare costs. Moreover, the Canada Child Tax Benefit and Quebec grants for children are also inversely related to your net family income

 

contact us

Advisory ServicesFERIQUE Investment Services
Monday to Friday 8 a.m. to 8 p.m.
T 514-788-6485
Toll free 1-800-291-0337
client@ferique.com