Registered Education Savings Plans (RESP)

Education is the best gift you can give your child, grandchild, or other loved one. Post-secondary education has become vital to one’s employability in the current economy, but it can also be costly. For a student living away from home, the cost of each year of university can be upwards of $20,000!

Registered Educations Savings Plan

Why invest in an RESP?

RESPs are a great way to save for the education of your children, grandchildren, or anyone else you choose. The Canadian government allows RESPs to grow tax-free until the child (beneficiary) is ready for post-secondary education.

Other benefits include:

  • Ability to access your funds tax-free at all times (CESGs must be repaid).
  • Tax-sheltered investment income.
  • Many plans offer the option to transfer your funds to an RRSP if your beneficiary decides not to pursue post-secondary education or to another beneficiary.
  • Allows your child the financial freedom to attend school loan-free.
  • Access to a range of investment funds.

Quick facts:

  • RESP-holders may contribute up to a lifetime maximum of $50,000 per beneficiary.
  • Funds must be retired by the end of the 35th year after the plan was first started.
  • There is no age limit for individual RESPs, but final contributions to a family RESP must be made by the beneficiary's 31st birthday.

Canada Education Savings Grant (CESG) Program

Another benefit includes government grant eligibility under the Canada Education Savings Grant (CESG) Program. Under CESG, The Government of Canada will provide an extra 20% of your annual contribution up to $500 per year per beneficiary and up to a lifetime limit of $7,200 per beneficiary.

To qualify for CESG, a beneficiary must be a Canadian resident under the age of 18 with a social insurance number.

Additional CESG

In 2005, the government updated CESG to encourage post-secondary education by increasing payments based on family net income.

Updates include:

  • 40% CESG payment on first $500 contributed where family net income is less than $42,708 (2012)
  • 30% CESG payment on first $500 contributed where family net income is between $42,708 and $85,414 (2012)

Canada Learning Bond (CLB)

If your child was born after December 31, 2003, the Government of Canada will help kick start their education with $500 plus an extra $100 per year up until age 15. The bond does not require you to contribute your own money into the RESP.