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Registered Education Savings Plan (RESP)
A Registered Education Savings Plan (RESP) is a tax-sheltered savings plan that helps parents, grandparents, family, or friends save towards a child’s future post-secondary education.
Using an RESP is a smart way to maximize education savings and grow these savings faster.
Individual RESP
Anyone can open these plans, you do not have to be the parent or related to the person you are saving for (the beneficiary). You can set up an RESP for yourself or another adult.
Family RESP
You can name 1 or more children as beneficiaries, but they must be related to you. Beneficiaries must be siblings of one another to receive the CESG. Under certain circumstances, you can transfer grant money to other beneficiaries.
Benefits of the RESP
Tax-Deferred Growth
Earnings within a RESP are not taxed until it is withdrawn. The student will pay tax on the investment earnings and government grant money, often resulting in little or no tax.
Flexibility
If the child does not decide to pursue post-secondary education, there are few options to consider that allow you to still benefit from your savings.
Start Sooner & Benefit
The sooner you start saving the more time your contributions will have the chance to grow.
Government Grants
With the help of federal and provincial savings grants, you can grow your savings faster and can potentially add more money to your plan.
Canada Education Savings Grant (CESG)
- The government matches 20% on the first $2,500 contributed annually to an RESP, up to a maximum of $500 per year and $7,200 in total, per beneficiary
- Depending on your income, additional CESG grants may be available
- If you don’t contribute enough to qualify for the maximum $500 CESG, it can be carried forward to the next year
Canada Learning Bond (CLB)
- A $500 Canada Learning Bond (CLB) is provided for children of families who are of modest income and are born after December 31, 2003
- As long as the children’s family continues to meet income thresholds, they qualify for CLB instalments of $100 per year until age 15
- Total maximum CLB payable per child is $2,000
- CLB’s cannot be shared with other beneficiaries and are allocated to a specific child (unlike CESG’s)
Top up your annual contributions and be sure to maximize these grants!
Life Happens!
If plans change and an RESP beneficiary decides not to pursue post-secondary education, you can transfer your savings to an RRSP. At this time, there are options to consider.