RESPs

A Registered Education Savings Plan (RESP) is a government approved plan for the purpose of providing post-secondary education funding for a beneficiary. Income earned under the plan is not taxed until it is withdrawn. The federal government will contribute at least 20% for every dollar on the first $ 2,000 of annual RESP contributions made on behalf of the beneficiary.

RESP investment plans that allow a subscriber to save for a child's future educational expenses. RESP savings can be used to pay for tuition, books and living expenses.

Depending on your relationship to the beneficiary, there are two types of RESPs you can set up:

  • Individual RESP
    One person is the beneficiary and they do not have to be related to the subscriber.
  • Family RESP
    There can be more than one beneficiary as long as they are all related to the subscriber by blood relationship. A blood relationship includes: son, daughter, brother, sister, grandchild or adoption.

Unlike RRSPs, contributions made to an RESP are not tax deductible. However, the contributions grow tax-free in the account, and the income earned on the contributions is not taxable until paid out to a beneficiary (who is typically taxed at a very low rate, if at all).

Withdrawals of income can be made to a beneficiary in full time attendance at a qualified post-secondary institution. RESP rules along with the Canada Education Savings Grant program (CESG) make RESPs attractive and flexible. The government will match 20% of what the subscriber contributes each year to the beneficiary, up to a maximum of $400 per year ($800 if there is CESG carry forward)." Deposits made to RESPs are fully insured with no limit on maximum amount.