What is a registered education savings plan?

August 14, 2019. A Registered Education Savings Plan (RESP) is a tax-deferred savings account the helps you save money for your child’s post-secondary education.

How does an RESP work?

• An RESP can be set up for a beneficiary who is a Canadian resident and has a Social Insurance Number.
• You can contribute up to $50,000 for 31 years and the plan can be open for 35 years.
• Your child can take up to 35 years to cash in the RESP or you can choose another beneficiary.
• Your RESP can hold other investments like GICs, stocks, bonds, and mutual funds.
• Contributions are not tax deductible.
• There are government incentives like the Canada Education Savings Grant and Canada Learning Bond.
• RESPs are not taxed until the student takes out funds for their education, which often means no tax or a low tax rate because the student’s income will likely be low.

Advantages of an RESP

How to benefit from your RESP and the Canada Education Savings Grant (CESG)

The CESG matches contributions at 20% annually up to $500 and can use grant room left over from past years. It will match your contributions up to $7200 for each child.

Make the most of the CESG by:

• Contributing to your RESP as soon as possible instead of waiting a few years after your child is born. Starting early makes the most of the compounding interest.
• Setting up pre-authorized contributions so you do not have to remember to put money into your RESP.
• Contributing beyond what is matched by the CESG to the $50,000 maximum per child.

You may qualify for the Canada Learning Bond (CLB)

Families with low incomes with children born on or after January 1, 2004 qualify for the Canada Learning Bond.

• The government initially contributes $500.
• The government contributes $100 per year until your child is 15 if your family meets the low-income tax threshold.
• Your child can use their RESP for university, college, trade school, and apprenticeship programs.

Is an RESP right for your family?

An RESP is an easy and effective way to save for your child’s post-secondary education and you can take advantage of it regardless of your income level. Contributing even small amounts regularly will add up over time and can cover a large portion of your child’s education.