Registered Education Savings Plan (RESP)
RESPs can be a great way to save for a child’s post-secondary education. The money invested in an RESP can grow tax-deferred until the time of withdrawal, and the best part is that the government can contribute up to $7,200 directly to a child’s RESP.
Benefits of an RESP
Tax-deferred growth potential
RESP earnings are tax-deferred. Contributors do not receive a tax deduction for investments in an RESP. There are no taxes due until funds are taken out to pay for a child’s education. At that time, contributions made into the RESP are returned tax-free, although contributors’ earnings from the plan are taxed. The money the government pays out is taxed to the students. However, since a large number of students have little to no income, many can withdraw the money tax-free.
Child's Education
The Registered Education Savings Plan (RESP) is a long-term savings plan to help people save for a child's education after high school, including trade schools, CEGEPs, colleges, universities, and apprenticeship programs. An adult can also open an RESP for themselves.
Friends and family can contribute
Friends and family can open an RESP to help you save for your child's education.
How RESPs work
- You contribute money into a child’s RESP. The government will then contribute an additional 20% on the first $2,500 contributed annually, up to a maximum of $500 a year. That can add up to $7,200 over the lifetime of the RESP, per child, in grant money through the Canada Education Savings Grant (CESG). You may also be eligible for the Canada Learning Bond (CLB) and additional provincial grants.
- There are no annual contribution limits or any limits on the number of RESPs you can have. Keep in mind that the lifetime contribution limit is $50,000 per child and you could make RESP contributions for up to 31 years.
- You can set up an individual or family RESP. An individual plan is meant for one child, whereas savings in a family plan are shared among multiple children.
