RESP Plan
Government sponsored plan with rules and restrictions
Proceeds can only be used for post-secondary education- A 20% penalty may be levied if not used for education
- Fees on some plans can be excessive
Children's Plan Education Savings Plan
1
It can be used for any dream that your child has and is not limited to educational use
It also benefits children that want to go to school outside of Canada to schools which may not be on the RESP approved list.
2
Your child will receive an annual dividend for life
Although contributions are only made over a 10 or 20 year period, dividends continue to grow for life.
3
Your child will also have the benefit of paid up lifelong life insurance coverage
This paid up life insurance will be in place for when your child has a family of their own.
4
As the parent or grandparent you have full control over the funds
This plan allows you to maintain control over the cash values even after the plan is transferred tax-free to the child at age 18.
Children's Plan Sample Illustration
Age
Cash Value
Goal
Life Insurance
20
$78,093
Education
$487,368
35
$197,306
Home Downpayment
$784,623
45
$353,938
Business Start-Up
$1,029,068
65
$1,064,164
Retirement
$1,796,856
This sample illustration is based on contributions over 20 years for a male under the age of one. The projected values are based on a Canadian insurance company's current dividend credit rate of 6%. This example is for illustrative purposes only.
Why choose Child Plan?
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There are NO restrictions on how the savings can be used
Unlike other plans this plan is not restricted to only be used for approved educational institutions
Your child will receive an annual dividend for life
Although contributions are only made over a 10 or 20 year period, Dividends continue to grow
Your child will also have the benefit of paid up lifelong insurance coverage
This paid up life insurance will be in place for when your child has a family of their own
As the parent you have full control over the funds
Unlike other plans this plan allows the owner of the plan to maintain control over the cash values even after the plan is transferred to the child at age 18
Child Plan Sample illustration
Based on a $250 monthly contribution
Age
Cash Value
Goal
Life Insurance
Value for Future
Value for Future
20
$ 78,093
Education
$ 487,368
35
$ 197,306
Home
Downpayment
Downpayment
$ 784,623
45
$ 353,938
Business
Start-Up
Start-Up
$ 1,029,068
65
$ 1,064,164
Retirement
$ 1,796,856
This sample illustration is based on contributions over 20 years for a male under the age of one. The projected values are based on a Canadian insurance company's current dividend credit rate of 6%. This example is for illustrative purposes only.
What if your child does not use their RESP?
- You can transfer to another child if needed. Fees may apply.
- You can transfer it to your RRSP if you have the contribution room but
there will be a 20% penalty applied by the government. Additional rules apply.
Here is what happens when you close your RESP.
- You will receive all of your contributions as long as you are not with a Group
RESP company that has “significant” penalties upon closing a plan. - You are required to return the government grant.
- You are required to pay tax on any investment growth.
- The government will levy an additional 20% penalty on the investment growth.
Source: Government of Canada website on RESPs
RESP Plan vs. Child Plan
Child Plan
Privately held plan with more options and flexibility
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Proceeds can be used for any of your child’s future plans- Your child continues to earn Dividends for life
- Plan includes lifelong paid up life insurance
- The investment grows tax sheltered and can be withdrawn in a tax-efficient way
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When it came near enough he perceived that it was not grass, there were no blades, but only purple roots.
