Registered Education Savings Plan
AN RESP IS A PLAN SPONSORED BY THE GOVERNMENT THAT ENCOURAGES INVESTING IN A CHILD’S FUTURE POST-SECONDARY EDUCATION.
An RESP is an effective way to save for a child’s post-secondary education. The government and certain provinces offer several grants to help investors build their education savings. Contributions are not tax-deductible, but money within the plan and any grants can grow tax-free until it’s withdrawn for educational purposes.
Benefits of a Registered Education Savings Plan
The government may add to your RESP contributions (up to a maximum of $500.00 per year, per child) with the Canada Education Savings Grant (CESG). The CESG is payable until the end of the calendar year in which a child turns 17, and the maximum lifetime CESG payment is $7,200.00
Although contributions are not tax-deductible, all investment income generated in the RESP is tax-sheltered as long as it remains in the plan
You can decide how much money should be withdrawn and when it should be withdrawn. The withdrawals can be used for a variety of education costs, including tuition, books and living expenses
When money is withdrawn, and used to pay for the child’s post-secondary education, the plan earnings and government contributions are taxed in the child’s hands. As a student, the child may pay little or no taxes on the money