Education plans can help tax savings

Four-in-ten (42 per cent) Canadian families with children under the age of 12 are not taking full advantage of tax savings, including 17 per cent who say they are not aware of what options are available to them, according to a new RBC Tax Planning Poll.
The RBC poll also found that just over half (56 per cent) of young families are currently saving for their child’s post-secondary education. Of the 44 per cent who are not currently saving, nine per cent feel they won’t need to, but the majority (84 per cent) of the rest said that they would like to, but are unable due to their current financial situation.
The top financial challenges for parents are having money left over from paycheque-to-paycheque (30 per cent), followed by paying down debt (28 per cent).
Registered Education Savings Plans (RESPs) allow money deposited for your child’s post-secondary education to grow tax-free until they attend university or college.
The federal government supplements RESPs through the Canada Education Savings Grant (CESG), which matches contributions by 20 per cent up to an annual maximum of $500 or $7,200 over the life of a plan. Upon withdrawal, the income is taxed in the child’s hands, so there should be little or no tax payable given the child will be in a lower tax bracket.
Additional federal grants are available for lower-income families.
Parents can find more information about money management by visiting
rbc.com/couplesandfamilies.