RESP Guide Part 2
Limit of contribution
Your annual contribution in RESP has no limit at all. Since the year 2007, there is no upper limit in the contribution for RESP, where the beneficiary can get the maximum amount of $50,000. But the only limit is not to contribute more than $50,000, else you will be subjected for a penalty of 1% per month for the over contribution and you will be asked to withdrawn.
Government offers Canada Education Savings Grant (CESG) of 20% on the first $2,500 invested by the parents for the child’s higher education. The grant of $500 is contributed towards RESP every year.
The maximum grant the government offers on your lifetime investment towards RESP would be $7,200 over 15 years of time, where you invest $2,500 per year. According to the survey, it is found that the children who pursue university studies are from families having income more than $100,000 than the children from the families having income less than $25,000.
In order to encourage the lower income families, the government had decided to offer CESG with additional 20% on the first $500 for families having the net income less than $45,282. The government has offered an additional grant of 10% to the families having the net income between $45,283 and $90,563.
CESG offers basic grant and the additional grant to the families having different net income over the contribution of $2,500 is given below:
Net income Additional CESG Grant Basic CESG Grant Total
Below $45,282 First $500 x 20% = $100 20% x $2,500 = $500 $600
$45,282 to $90,563 First $500 x 10% = $50 20% x $2,500 = $500 $550
Over $90,563 First $500 x 0% = $0 20% x $2,500 = $500 $500
The RESP contribution is mainly dependent on various factors responsible and on different plans. Every RESP plan is useful for investment and is having set of benefits which are useful for longer investments. The RESP plan is ideal for children to have higher education and it helps in making the insurance plan very successful.
The families of lower income and having the children born after December 2003 will also get the required assistance from Canada Learning Bond (CLB). The families receive National Child Benefit Supplement and are qualified to receive the $500 and $100 as CLB grant every year till the child reaches the age of 15 years.
Munish Mehan plans Registered education savings Plan for those who understand the value of education for their kids.
You can reach him at firstname.lastname@example.org