Registered Education Savings Plan

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What is an RESP?

An RESP is a savings vehicle designed to encourage parents to save for their child's education expenses.  The subscriber, usually the parents or grandparents, make contributions to the plan, and the beneficiary, usually the child or grandchild, receives the funds for paying education expenses such as tuition fee.  The assets within the RESP grow tax-free until the beneficiary withdraws them in the form of Education Assistance Payment (EAP).

Family Plan

The family plan can be used if you have more than one child in the family receiving the funds.  The children have to be related to the subscriber, by blood or adoption.  They may be children, stepchildren, grandchildren, and siblings.

Tax Sheltered

The money grows tax-free within the RESP, allowing it to grow faster than a taxable account.  The contributions, however, are not tax-deductible and cannot be used to lower the subscriber's tax bill.

Canada Education Savings Grant

The CESG is a special incentive offered by the government to encourage parents to save for their child's education.  Each year, CESG provides 20% of RESP contributions up to a maximum of $2,500.  In other words, a maximum of $500 CESG can be added to an RESP each year.  Additional CESG may be eligible based on family income.  The lifetime CESG amount a child can receive is $7,200.

Canada Learning Bond

CLB is another incentive offered by the government for children in low-income families.  It contributes up to $2,000 to an RESP for an eligible child.  No contributions to the RESP are required to receive CLB.

Withdrawal

The plan allows the child to withdraw the money in the form of Education Assistance Payment (EAP) for education expenses - costs of part-time or full-time studies after high school.  The EAP is included as income in the child's tax return, usually taxed in a low tax bracket or no tax at all.