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Understanding Registered Education Saving Plan.

A Registered Education Savings Plan (RESP) is a special savings account to help Canadian residents save for a child’s post-secondary education.

An RESP is a great way to save for your children’s postsecondary education. The money saved in a RESP can be used to pay tuition and other expenses associated with higher education, such as accommodation, school supplies, food, and transportation.

Similar to a registered retirement savings plan (RRSP), the money accumulates under a tax shelter until it is withdrawn to fund educational expenses.

More RESP Information:

Who can open an RESP?

Anyone can open a RESP for a child, including parents, grandparents, godparents, uncles, aunts, and friends. A child can benefit from many RESPs.

If a group of you are providing money for a single child, you must stay under the governmental contribution limitations to avoid tax penalties, as the maximum contributions are set per child.

Who can be named as the beneficiary of an RESP?

You can designate any child you choose, and you do not need to be related to that child.

You can even change the beneficiaries once the plan has been implemented. Contributions can then be made until the plan term ends, which is defined by the new beneficiary’s age.

How much money can you save?

The maximum lifetime contribution is $50,000 per child, with no annual contribution limits. This means you can adjust your contributions to fit your budget, as long as you stay under the lifetime maximum per child.

How to leverage significant government grants to increase your savings?

The Canada Education Savings Grant (CESG) was established by the federal government to encourage parents to make early investments in their children’s postsecondary education.

The CESG at a glance:

Annual grant: 20% of annual contributions
Annual limit: $500
Lifetime maximum per child: $7,200

Some provinces offer their own grant programs in addition to the CESG.

The federal and provincial grants are paid directly into the RESP and grow along with your own contributions. These little extras can provide a big boost to your savings.

RESP Benefits includes:

Savings for Your Children

Help you systematically save and plan for a child’s education

Tax Free Growth of Investment

Tax-sheltered growth – there are no taxes payable on the money earned in a RESP until it’s withdrawn

Government Grant (20%)

Government Grants – Government matches 20% of RESP contributions up to $2,500 each year and to a lifetime maximum of $7,200, Additional Grants and bonus available for low-income families

Self Control on Investment Contribution

Save on your own schedule - No pre-defined savings structure within lifetime contribution limit of $50,000, Ability to catch up for any prior years you missed contributing

Maximize the Government Grant

RESP loans can be used to maximize the Government Grant, Most part-time and full-time post-secondary education qualifies for purposes of a withdrawal

Flexible in terms of joint RESP plan

With a Family RESP, if one sibling doesn’t pursue post-secondary education, other siblings can use their grant money