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A new RESP… for my teen!

Written by: Universitas

December 9, 2014

We often hear that we should start investing early in an RESP, and there’s a reason for this: investing over a longer period of time ensures greater returns and maximizes the grant amounts received. But if you only just thought of opening an RESP, you shouldn’t give up on the idea because your child is older! If you start contributing before the end of the year he or she turns 15, there are ways to catch up on unused amounts; you just need to know how it all works.

Why 15 years old?

Normally, your contributions to an RESP attract government grants until December 31stof the year in which the beneficiary turns 17 years old. However, in the case of an RESP opened after December 31st of the year the child turns 15, you can still make contributions, but will receive no grants for these.

Still, government grants could accumulate in your plan during this period of the beneficiary’s life if you meet one of the following criteria1:

  • If the child is 12 years or younger, the parents must contribute at least $100 per year for four years by December 31st of the year the beneficiary turns 15.
  • If the child is older than 12, they must contribute at least $2,000 before the end of the year their child turns 15 years old.

These criteria are not specific to Universitas; they apply to all Canadian RESP providers. Nonetheless, investing in such a plan still has its benefits even if you do it later in life. Maryse Breton, Universitas Branch Manager in Estrie, knows about this, and her extensive knowledge sure helped a few.

What you need to know about the RESP is that grant room starts accumulating from the child’s birth. To receive these unused amounts, the subscriber who opens an RESP when the beneficiary is older can contribute up to $36,000, for a maximum of $5,000 per year.

Let’s take Anthony2 as an example. His parents asked for their representative’s help when they realized their son would soon leave to pursue his post-secondary studies in another region. They chose to invest as much as they could in an RESP, and their representative suggested that they invest $5,000 per year for four years. Here’s what such an investment would give them:

 

Anthony’s age

14 years

15 years

16 years

17 years

Total

Parents’ investment (will attract government grants)

$5,000

$5,000

$5,000

$5,000

$20,000

CESG

$1,000

$1,000

$1,000

$1,000

$4,000

QESI

$500

$500

$500

$500

$2,000

Value of RESP

$6,500

$6,500

$6,500

$6,500

$26,000

 

This means that investing $20,000 over four years would give Anthony $6,000 in grants, and we haven’t talked about the income earned on these and the contributions! What’s more, his parents will even recover the amount they invested once he turns 17 years old: talk about a profitable investment!


1. Meeting one of these two criteria is enough to open a registered education savings plan of the INDIVIDUAL plan, but not a group plan.
2. Fictional name.

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