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 Income earned under the plan is not taxed until it is withdrawn.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 $ 2,500 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.
An RESP can hold a combination of eligible investments, such as mutual funds, stocks, bonds and ETFs *, Guaranteed Investment Certificates (GICs), and cash.
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 (CESG) program 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 $500 per year ($1000 if there is CESG carry forward). Deposits made to RESPs are fully insured with no limit on the maximum amount.
One person is the beneficiary and they do not have to be related to the subscriber.
There can be more than one beneficiary as long as they are all related to the subscriber-by-blood relationship. A blood relationship includes a son, daughter, brother, sister, grandchild, or adoption.
Employment and Social Development Canada (ESDC) offers an extra financial incentive of up to $2,000 to support low-income families to save early for their child’s post-secondary education. The Canada Learning Bond (CLB) is deposited directly into the child’s Registered Education Savings Plan (RESP).
To find out if you qualify and for more information click here.
*Mutual funds and other securities are offered through Aviso Wealth, a division of Aviso Financial Inc. Commissions, trailing commissions, management fees, and expenses may all be associated with mutual fund investments. Please read the prospectus before investing. Unless otherwise stated, mutual funds, other securities, and cash balances are not covered by the Canada Deposit Insurance Corporation or by any other government deposit insurer that insures deposits in credit unions. Mutual funds and other securities are not guaranteed, their values change frequently and past performance may not be repeated.
At Kingston Community Credit Union, eligible deposits in registered accounts have unlimited coverage through the Financial Services Regulatory Authority (FSRA). Eligible deposits (not in registered accounts) are insured up to $250,000 through FSRA.
A third party is an individual or entity, other than the account holder or those authorized to give instructions about the account, who directs what happens with the account. For example, if an account were opened in one individual’s name for deposits that are directed by someone else, the other person or entity would be a third party.
