Investment

Benefits of investing in a Registered Education Savings Plan RESPs

Published

4 years ago

July 9, 2020

A registered education savings plan (RESP) is widely known for the benefits it provides and its versatility in being able to use it whenever the need crops up. However, there are many other benefits of investing in these accounts that can help you in getting returns in the long run. Let us have a look at the most prominent benefits of investing in RESPs.

Investing in the registered education saving plan is a safe way to save funds for the said purpose. Let us consider why you should invest in RESPs.

Aided by the government – The federal government, through the Canada Education Savings Grant, adds 20% per dollar to your savings, with an annual limit of $ 500. The maximum limit for a lifetime is $ 7,200 per child. In the case of families with a lower income, choosing to invest in such funds can be a great deal. Henceforth, anyone eligible as per the rules and regulations can apply for it.

Taxable in the hands of the beneficiary –

When the beneficiary/child enrols for any post-secondary education program, they are eligible to get access to payments (also known as – educational assistance payments) from their funds. These payments are composed of a specific investment income and government grants.

Also, the tax on these assistance payments remains taxable on the hands of the person registered as the beneficiary. It is a strong possibility that the students do not have their income and are likely to fail to pay tax on such payments. However, the RESP withdrawal transactions are kept charge free. Learn more about taxes and RESPs here.

Flexibility in transfer – RESPs can be a great alternative; then, you need to do the funds from your registered education savings plan to your registered retirement savings plan (RRSP). As per the rules, you’re allowed to transfer $50,000 from your RESP funds to your retirement savings plan. Hence, the amount is freely transferable.

Easy setup – Easy access and set up is another great benefit of investing in the registered education savings plan. Almost anyone can set up an individual account for their child. The funds can grow faster when additional contributions come from friends and other family members when the contributions make the funds sustain for long.

Longevity – There are chances that the beneficiary may choose to defer their education plans once they pass high school. Since the funds in RESPs are accessible for a period of 36 years, they can utilize the funds whenever they feel like giving it a start. However, it is always advisable to go through the rules to ensure that there are no specific restrictions on this.

How do RESPs work?

RESP is an account that enables you to initiate investing for your child’s post-secondary education. In each case, the government contributions are subject to taxation only if they are withdrawn or paid for the beneficiary. As long as the recipient takes enrollment in any academic program, the fund is for the beneficiary.

The fund is to aid expenses for part-time or full-time studies in any academic program. It can be for trade, school, college or university. However, this payment entirely depends upon the RESP contribution made by the account holder into the RESP account. Also, the required contributions should be regularly made into a Registered Education Savings Plan to gain government grants.

It is important to note that as long as there is an appropriate confirmation of admission or enrollment in an educational program, the accumulated funds are for his purpose. Also, you can support the miscellaneous expenses for the education of the beneficiary using this fund. Hence, most certainly, almost anyone can open an RESP account for a child, naming them as the beneficiary.

Government Grants and RESPs

Since it is a government-aided fund, there are various benefits of it. However, there are several downsides to an RESP that should be known to anyone who intends to open an account in it. For example, if the child decides not to attend the college or university, the government will gets back its funds. However, the account holder can keep the funds belonging to his share, or any money made out of it.

Economy

S&P/TSX composite down more than 200 points, U.S. stock markets also fall

Published

7 days ago

September 6, 2024

Anne Joseph

TORONTO – Canada’s main stock index was down more than 200 points in late-morning trading, weighed down by losses in the technology, base metal and energy sectors, while U.S. stock markets also fell.

The S&P/TSX composite index was down 239.24 points at 22,749.04.

In New York, the Dow Jones industrial average was down 312.36 points at 40,443.39. The S&P 500 index was down 80.94 points at 5,422.47, while the Nasdaq composite was down 380.17 points at 16,747.49.

The Canadian dollar traded for 73.80 cents US compared with 74.00 cents US on Thursday.

The October crude oil contract was down US$1.07 at US$68.08 per barrel and the October natural gas contract was up less than a penny at US$2.26 per mmBTU.

The December gold contract was down US$2.10 at US$2,541.00 an ounce and the December copper contract was down four cents at US$4.10 a pound.

This report by The Canadian Press was first published Sept. 6, 2024.

Companies in this story: (TSX:GSPTSE, TSX:CADUSD)

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Economy

S&P/TSX composite up more than 150 points, U.S. stock markets also higher

Published

2 weeks ago

August 29, 2024

Anne Joseph

TORONTO – Canada’s main stock index was up more than 150 points in late-morning trading, helped by strength in technology, financial and energy stocks, while U.S. stock markets also pushed higher.

The S&P/TSX composite index was up 171.41 points at 23,298.39.

In New York, the Dow Jones industrial average was up 278.37 points at 41,369.79. The S&P 500 index was up 38.17 points at 5,630.35, while the Nasdaq composite was up 177.15 points at 17,733.18.

The Canadian dollar traded for 74.19 cents US compared with 74.23 cents US on Wednesday.

The October crude oil contract was up US$1.75 at US$76.27 per barrel and the October natural gas contract was up less than a penny at US$2.10 per mmBTU.

The December gold contract was up US$18.70 at US$2,556.50 an ounce and the December copper contract was down less than a penny at US$4.22 a pound.

This report by The Canadian Press was first published Aug. 29, 2024.

Companies in this story: (TSX:GSPTSE, TSX:CADUSD)

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Investment

Crypto Market Bloodbath Amid Broader Economic Concerns

Published

1 month ago

August 5, 2024

Harry Miller

The crypto market has recently experienced a significant downturn, mirroring broader risk asset sell-offs. Over the past week, Bitcoin’s price dropped by 24%, reaching $53,000, while Ethereum plummeted nearly a third to $2,340. Major altcoins also suffered, with Cardano down 27.7%, Solana 36.2%, Dogecoin 34.6%, XRP 23.1%, Shiba Inu 30.1%, and BNB 25.7%.

The severe downturn in the crypto market appears to be part of a broader flight to safety, triggered by disappointing economic data. A worse-than-expected unemployment report on Friday marked the beginning of a technical recession, as defined by the Sahm Rule. This rule identifies a recession when the three-month average unemployment rate rises by at least half a percentage point from its lowest point in the past year.

Friday’s figures met this threshold, signaling an abrupt economic downshift. Consequently, investors sought safer assets, leading to declines in major stock indices: the S&P 500 dropped 2%, the Nasdaq 2.5%, and the Dow 1.5%. This trend continued into Monday with further sell-offs overseas.

The crypto market’s rapid decline raises questions about its role as either a speculative asset or a hedge against inflation and recession. Despite hopes that crypto could act as a risk hedge, the recent crash suggests it remains a speculative investment.

Since the downturn, the crypto market has seen its largest three-day sell-off in nearly a year, losing over $500 billion in market value. According to CoinGlass data, this bloodbath wiped out more than $1 billion in leveraged positions within the last 24 hours, including $365 million in Bitcoin and $348 million in Ether.

Khushboo Khullar of Lightning Ventures, speaking to Bloomberg, argued that the crypto sell-off is part of a broader liquidity panic as traders rush to cover margin calls. Khullar views this as a temporary sell-off, presenting a potential buying opportunity.

Josh Gilbert, an eToro market analyst, supports Khullar’s perspective, suggesting that the expected Federal Reserve rate cuts could benefit crypto assets. “Crypto assets have sold off, but many investors will see an opportunity. We see Federal Reserve rate cuts, which are now likely to come sharper than expected, as hugely positive for crypto assets,” Gilbert told Coindesk.

Despite the recent volatility, crypto continues to make strides toward mainstream acceptance. Notably, Morgan Stanley will allow its advisors to offer Bitcoin ETFs starting Wednesday. This follows more than half a year after the introduction of the first Bitcoin ETF. The investment bank will enable over 15,000 of its financial advisors to sell BlackRock’s IBIT and Fidelity’s FBTC. This move is seen as a significant step toward the “mainstreamization” of crypto, given the lengthy regulatory and company processes in major investment banks.

The recent crypto market downturn highlights its volatility and the broader economic concerns affecting all risk assets. While some analysts see the current situation as a temporary sell-off and a buying opportunity, others caution against the speculative nature of crypto. As the market evolves, its role as a mainstream alternative asset continues to grow, marked by increasing institutional acceptance and new investment opportunities.