Are you interested in education saving plans? Do you want to know which one can offer you maximum benefits? Then, you’ve landed on the right page, as this article focuses on the key features and discusses the popular types of saving plans.
As you might already know, there are numerous types of education saving plans. The majority of them come with specific features. Thus, if you are new to this industry, you might find it hard to choose the right option that fits you.
While considering an investment into a particular savings plan, you should thoroughly analyze the features of the plan in question. You need to know what your needs are and what you can expect from the education savings plan.
Key Features of Education Savings Plan
- You will have to make a regular contribution to generating the growth on the savings in the long term.
- These savings are separated from any other types of savings and investments.
- These plans cover a broad range of educational costs that will include fees for books, uniforms, and extra-curricular activities.
- The earnings will be tax effective. The fund will be taxed at 30%. If the fund will be used for educational purposes, the paid tax will be refunded.
- You will not have to pay any capital gain on the fund while redeeming your investment.
- The earnings funds will not be part of the assessable income.
- You can withdraw earnings for the non-educational spending as well. However, in this case, you will not get the tax benefits.
- Some saving plans are flexible and enable you to access your money whenever required.
Popular Education Savings Plans
RESP (registered education savings plan) is considered good as it enables you to spend funds for elementary through a college education. It offers a lot of beneficial features when compared to other savings plans. With this plan, you will get the tax advantage, which implies that your money in the account will grow tax-free. Moreover, there will not be any tax deducted if the earnings will be used for education-funding purposes.
According to the experts at Heritage RESP, it is also possible to receive a top-up to your savings plan from government grants. It is available to parents who contribute to an RESP.
Aside from these benefits, RESP offers flexible investment options, and once the child will reach 18 years of age, he/she can take over the control of the account.
Another option, the RRSP (registered retirement savings plan), is not designed as an education plan, yet, it can be considered for the minors.
With this plan, the money is not specifically dedicated for the education-funding purposes but can be used as per the account’s holder will.
It is a custodial account, which means your kids can receive assets as a gift. The RRSP is usually favored for beneficial estate and tax properties.
These are some of the best education saving plans. While the RESP is considered good for those who want a plan to cover all the education expenses, the RRSP will be ideal for those who want complete control over the plan.