Advantages Of An Early Age RRSP

There are many advantages of opening an early age RRSP. The followings are a few to mention:

• No actual contributions have to be made in the RRSP. Contributions can be made anytime later on. There is no time limit.
• Accumulates RRSP room for several years, which can be carried forward indefinitely and increases lifetime contribution limits.
• Allows a minor to contribute in RRSP right after entering work force. Someone who did not contribute at an early age wont be able to contribute right after entering work force because there will be no contribution room.
• RRSP deduction can be used anytime later on, when there is enough taxable income to use the deduction. There is no time limit to claim deduction.
• Gives income-splitting opportunity for parents who own business. Parents can hire their own children as employees and can pay then accordingly. Salary given to a child is a tax deductible business expense and it will create contribution room for the child.
• Contributions made in the RRSP will start growing and compounding tax free inside the plan.
• A great way to give children practical lessons about money management and personal finance at an early age.
  

Next time, I will discuss restrictions you might face opening a minor RRSP. These restrictions are placed by financial institutions.