Ralph Moss Limited

SMART MONEY MOVES

Investing in your children's future

The federal government has acknowledged how difficult it can be to pay for post-secondary education. To make it a little easier, the March 1996 federal budget increased the amount you may contribute to a Registered Education Savings Plan (RESP).

Like Registered Retirement Savings Plans, RESPs allow you to defer tax on earnings -- in other words, the money in the plan can grow without attracting tax each year. Unlike RRSPs, however, your contributions to an RESP can't be deducted from current taxable income. After a maximum of 25 years, the plan's earnings are distributed to the beneficiary to help pay post-secondary education costs. The income is taxed in the hands of the beneficiaries.

Effective this year, the amount that can be contributed to an RESP has been increased to $2,000 from $1,500 per year, with the cumulative limit rising to $42,000 from $31,500 per beneficiary. In addition, the federal budget removed some restrictions on other assistance that once affected the plans of beneficiaries.

YOUR MOVE. Maximum RESP contributions, combined with the 25-year tax deferral, can cover a good portion of your child's university costs. There are several types of plans available. Some provide full management for your contributions, while others leave the decisions up to you. With the self-directed RESP, you can invest your contribution in the same type of securities as qualify for your RRSP, including equity and fixed-income mutual funds. Be sure to explore all the possibilities before you commit yourself to a particular plan.