Registered Education Savings Plan (RESP)
An essential tool for securing your children's educational future. The RESP allows you to save for post-secondary education while benefiting from generous government grants.
Speak to an advisorKey points
What is an RESP?
The Registered Education Savings Plan (RESP) is an investment vehicle specifically designed to help finance post-secondary education. The major advantage of this plan lies in the generous government grants that enhance your contributions, making saving even more beneficial.
Government grants
Up to $7,200 in CESG per lifetime beneficiary
Growth in a sheltered environment
Investments that grow tax-free under the scheme
Broad eligibility
Open to a child, grandchild, nephew, niece or other
The advantages of the RESP
Government subsidies: One of the biggest advantages of the Registered Education Savings Plan (RESP) is the Canada Education Savings Grant (CESG). The government can contribute up to 20% of annual contributions, to a maximum of $500 per year and a lifetime limit of $7,200 per beneficiary. Lower-income households are eligible for an enhanced CESG on the first $500 of their contribution.
Tax-free growth: Investments within the RESP grow tax-free, meaning they can earn interest without you having to pay tax on the gains as long as the money remains in the plan.
Flexibility: Members have the opportunity to choose from a variety of investment options according to their risk tolerance and financial objectives.
Broad eligibility: An RESP can be set up for a child, grandchild, nephew, niece, or virtually any other child you know.
How does the RESP work?
An RESP is a term life insurance policy. When the child for whom the funds were saved is ready to pursue post-secondary education, they can withdraw amounts in the form of Educational Assistance Payments (EAPs). These withdrawals are taxable in the hands of the student, who is generally in a lower tax bracket.
Canadian Learning Bond (CLB)
For eligible individuals, the Government of Canada contributes between $500 and $2,000 to a Registered Education Savings Plan (RESP) to help with post-secondary education expenses. Most importantly, no RESP contributions are required to receive the Canada Education Savings Grant (CESG).
Key points to remember
Duration: An RESP can remain open for 36 years. In the case of an RESP for a person with a disability, this period is extended.
Contribution limits: There is no annual contribution limit to an RESP, but there is a lifetime limit of $50,000 per beneficiary.
Changes in beneficiaries: If the child for whom the RESP was established decides not to pursue post-secondary education, you can change the beneficiary of the plan without losing government grants, provided the new beneficiary is a brother or sister of the original beneficiary.
In Summary
Investing in an RESP isn't just a financial decision; it's a commitment to a child's future. With the right plan and a proactive approach, you can help ensure that education isn't a financial burden. At Gestalt, we're here to guide you every step of the way.
Frequently Asked Questions about RESPs
The Registered Education Savings Plan (RESP) is a savings account specifically designed to help families save for their children's post-secondary education.
Any Canadian resident can open an RESP for a child, whether they are parents, grandparents, legal guardians, or even family friends.
No, there is no annual contribution limit. However, there is a lifetime limit of $50,000 per beneficiary.
An RESP can remain open for 36 years.
The Canada Education Savings Grant (CESG) is a government grant that enhances your RESP contributions, up to a certain amount, to help increase savings for education.
Investments in an RESP, like most investments, are subject to market fluctuations and are not guaranteed. It is important to choose investments that match your risk profile.
You have several options, including changing the RESP beneficiary, transferring the funds to another type of registered account, or withdrawing the funds (conditions may apply).
Most universities, colleges, and technical training institutions in Canada are eligible. Many institutions abroad are also eligible.
You can withdraw your contributions at any time, but withdrawing earnings or government grants may result in tax consequences or the need to repay the grants.
Contributions can be withdrawn without tax consequences. However, government grants and earnings are taxable in the hands of the student when withdrawn.
Yes, under certain conditions, it is possible to transfer funds from an RESP to an RRSP or a RDSP.
Contributions can be withdrawn without penalty. However, withdrawing earnings or grants may have tax consequences and require the repayment of grants.
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