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What is an RESP?

A Registered Education Savings Plan (RESP) is a smart way to maximize education savings. Tax-sheltered investment growth and eligibility for government grants can make a big contribution to your child’s future.

A Tax Break on Savings

The money you contribute to an RESP is sheltered from tax. No income tax is paid on investment returns as long as money remains in the plan. That means investments compound and grow faster than when invested in a non-registered investment.

When money is withdrawn to pay for a child’s education, the investment growth and government grant portions of withdrawals are taxable in the child’s hands (but not the original contribution). Because the child will likely have a low tax rate while attending school, taxes should be minimal.

Take Advantage of Government Grants

The Canada Education Savings Grant (CESG) provides free government funds to help pay for your child’s education. Through the CESG the federal government matches 20% of annual RESP contributions, to a maximum of $500 a year and $7,200 over a child’s lifetime. Lower-income families may be eligible for additional CESG payments.

Contribute up to $50,000

Up to $50,000 can be contributed for each RESP beneficiary. Contributions can be through regular periodic payments or lump sum payments. There are no annual contribution restrictions.


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