Education is critical area of concern for parents. However, many of them aren’t aware of the educational benefits and incentives
they could be taking advantage of — which include a particular savings instrument for the Registered Education Savings Plan (RESP).
According to a recent Ipsos survey, education is the top priority for Canadians with children under the age of 14, with 92% saying that saving for education is just as important as paying off debt and saving for retirement. And while 52% said they take advantage of government incentives available through RESPs, only 32% of parents eligible for the Canada Learning Bond (CLB) said they were not aware of the benefit.
“Through the Canada Learning Bond (CLB), the government will contribute an initial $500 per child, then $100 each year until the age of 15 to a maximum of $2,000,” said Knowledge First Financial, a not-for-profit corporation and investment fund manager, administrator, and distributor of RESPs.
The firm said that as of July 1, CLB eligibility is determined based on the following guidelines:
- A family with up to three children and an adjusted net family income of $45,916 or less
- A family with 4 children and an adjusted net family income of $51,809 or less
- Net family income threshold increases with each additional child
RESP contributions are not required to receive CLB. Once the initial $500 CLB is placed in an RESP, the ongoing $100 CLB contributions are made automatically each year based on eligibility.
“A child who receives the full $2,000 CLB amount beginning as a newborn could see RESP savings grow to $3,200 in 15 years, based on a 5% rate of return and the power of compound monthly growth,” the firm said. “No tax is paid on the income earned until the money is withdrawn by the student.”
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