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A Registered Education Savings Plan (RESP) is a tax-sheltered account for parents, grandparents or anyone to help save money for a child’s post-secondary education (apprenticeship, trade school, college or university). The funds can be used towards paying for tuition, housing, books, and even living expenses. Post-secondary education can be very costly and an RESP is an excellent way to help you save for your child’s education. 

There are 2 main advantages to opening an RESP:

Tax savings

You are not taxed on investment income as long as the money stays in the RESP. It will be subject to tax upon withdrawal to the student, however, since most students will have zero to low income levels, the student may end up paying very minimal tax.

Free money

The Canada Education Savings Grant (CESG) matches 20% on the first $2,500 per year of contribution to a maximum of $500 per year. The maximum grant is $7,200 per student. The Canada Learning Bond (CLB) provides a maximum of $2,000 to children of low income families.

The funds in the RESP can be invested how you choose from Guaranteed Investment Certificates, mutual funds, bonds, or stocks. The choice is yours. 

The 2 most common types of RESPs:

Individual Plan – anyone can open and contribute to an individual plan.

Family Plan – only parents or grandparents can open a family plan and the beneficiaries (students) must be related to the contributor.

The lifetime maximum contribution you can make to an RESP is $50,000. The student must have a social insurance number in order for an RESP to be opened in their name.

Click here to learn more about how to withdraw RESP funds.