Registered Education Savings Plan (RESP)

Registered Education Savings Plans, or RESPs, are education investment plans that help you accumulate money for a child’s post secondary education. An RESP is an easy way to save for a child’s future. Planning for a child’s education through RESP contributions is a sound, responsible, simple way to help pay for a post-secondary education.

Free Money

With the Canada Education Savings Grant, or CESG, the government contributes to your RESP by matching 20% on a maximum of $2,500 in annual contributions until the beneficiary turns 17. This gives you up to $500 per year in free money. The lifetime CESG maximum is $7,200 per beneficiary. Families with lower incomes may be eligible for additional contributions. CESG rules also allow you to carry forward unused contribution room to later years.

The Canada Learning Bond, or CLB, provides up to an additional $2000 in grant money per beneficiary over the life of an RESP. To qualify, the beneficiary must be born on or after January 1, 2004, and the family’s net income must meet certain requirements. Eligible beneficiaries receive an initial grant of $500 and later grants of $100 in each year that they are eligible. An RESP must be opened to receive the CLB; however, you don’t have to make any contributions to the RESP to receive CLB grant money.

The maximum amount of grant per child is $7,200.

Your child can use the money for full-time or part-time studies in an apprenticeship program, CEGEP, trade school, college or university.

Great Flexibility

Income earned accumulates tax free until withdrawn - Students (with little or no income) withdrawing RESP funds will owe little or no tax. Virtually all full-time, post-secondary education is eligible. For family plans, you can name as many beneficiaries as you’d like. If one child doesn’t go to post-secondary school, another child can still use the money. If your child doesn’t pursue a post-secondary education, you may be allowed to transfer up to $50,000 of earnings from your RESP to your RRSP or a Spousal RRSP tax-free – assuming that the subscriber and/or spouse has RRSP contribution room available. RESP contributions and earnings may be withdrawn any time (certain conditions apply).

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