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Registered Education Savings Plan 

What is an RESP?

 

An RESP is a powerful way to save for your child's or grandchild's post-secondary education. Parents, grandparents and friends can contribute money any time to an RESP – up to a lifetime total of $50,000 per child. These contributions are not tax deductible, but any investment income that’s earned within the plan isn’t taxed until it's withdrawn.

In addition to tax-deferred growth, the federal government will also automatically contribute a Canada Education Savings Grant (CESG) of 20% of what you put in, up to $500 per year – to a lifetime maximum of $7,200 for each child. If your family income is low, you can receive an even higher amount. For details on these and other grants you may be eligible for, visit CESG.

You should consider an RESP if:

  • You want to make sure that an important child in your life has the opportunity to get a post-secondary education.

  • You want your child/children/grandchildren to have the benefits of the Canada Education Savings Grant program.

  • You think it’s a good idea to set up a tax-efficient account where relatives or family friends can recognize a child’s special occasions (birthdays, etc.) by contributing directly to his/her post-secondary education.

Types of RESPs available:

Family RESP plans

  • You (the planholder) can name 1 or more children as beneficiaries (the person/people you’re saving the money for), but they must be related to you.

  • Beneficiaries must be siblings of one another to receive the CESG.

  • Children, grandchildren, adopted children and stepchildren are fully eligible.

  • If the eldest child doesn't go to post-secondary school, under certain circumstances you can transfer the grant money to other beneficiaries.

  • You don't haveto split payments evenly among children.

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