Registered Education Savings Plans

Giving your children the best gift of all with an RESP

Access to a post-secondary education is no longer a sure thing. With costs rising steadily, this privilege is becoming a rare thing.

As with most things in life, giving your children the choices that come from a higher education means planning it now. And planning for an education fits very nicely with a long-term investment plan.

With a Registered Educational Savings Plan (RESP), you have up to 31 years to benefit from regular investments and compounding. In addition, while governments are cutting costs in other areas, they have actually established an RESP program to help encourage you to save for your children's education.


Like an RRSP, an RESP is registered with the federal government and assets held in the plan grow tax-free until they are withdrawn, allowing assets to accumulate faster than those held outside an RESP.

Unlike an RRSP, contributions to an RESP are not tax deductible.

When the money from the RESP is withdrawn, the earnings are taxed in the child’s (beneficiary’s) hands. Usually, the beneficiary is in a lower tax bracket, or possibly not taxable due to personal, education and tuition tax credits.

As your child grows and becomes more involved in their educational portfolio, they will also learn important lessons that will last them a lifetime:

  • Anything worthwhile takes time to build
  • By investing, you can build the financial assets you'll need later on
  • Life has ups and downs
  • With a good plan and good values, you can weather any storm

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Investing In Learning

One of the smartest decisions you can make is to start planning now for your children's future education needs. Specifically, their post-secondary education. After all, there's no denying the facts, the cost of post-secondary education is continually rising. It's becoming increasingly important to have a post-secondary education, while at the same time there are less government funds available for loans and scholarships.

A Registered Education Savings Plan, better known as an RESP is the government's way of helping you help your children. It is a vehicle used to save for your children's post secondary education. There is a lifetime limit of $50,000 per child (beneficiary). And when it comes to contributing, you're not alone, grandparents, relatives and friends may also be able to contribute to your child's RESP.

There are many benefits of RESPs. Firstly, you will appreciate that an RESP allows you to retain ownership of the funds. You - and not your children - have complete discretion over the entire plan.

Secondly, you'll enjoy the tax-deferral opportunity afforded by RESPs. When you contribute to an RESP, taxes on income are deferred until the funds are withdrawn. When the funds are eventually withdrawn, the accumulated income is taxed in your children's hands - in their lower or non-existent tax bracket. The only requirement is that your children use the funds for qualifying post-secondary schooling. The federal government also provides the Canada Education Savings Grant (CESG) as an enhancement to RESPs.

Through the CESG, the federal government will provide a grant equal to 20 percent of your first $2,500 in contributions made on behalf of an eligible beneficiary each year. The yearly grant maximum is $500 per beneficiary with a lifetime maximum grant amount of $7,200. Another advantage is that you can withdraw your contribution portion of the RESP tax-free at any time, since your contributions were made with after-tax dollars and were not tax-deductible.

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RESP Rules

  • You can invest up to a lifetime maximum of $50,000 per child.
  • Under a family plan, you can name as many beneficiaries* to the plan as you want.
  • Contributions can be made for up to 31 years, and the plan must be collapsed within 35 years of the end of the year it starts.
  • Contributions are not tax deductible, so they may be withdrawn tax-free at any time.**
  • The income within the RESP grows on a tax-sheltered basis and is paid out in the form of Educational Assistance Payments (EAPs) to qualifying beneficiaries in whose hands the money is taxed. In most instances, there will be little or no tax to pay.
  • To use the accumulated income in an RESP, beneficiaries must attend an accredited post-secondary institution on a full-time basis. The program must be no less than three consecutive weeks (13 weeks if the educational institution is outside Canada) with at least 10 course hours per week. Correspondence courses qualify, as do universities, community colleges, junior vocational and technical colleges, as well as many universities outside Canada.
  • Part-time students will be allowed to access up to $2,500 of their income and grants for each 13 week semester. Students will be required to be enrolled in a qualifying education program for at least 12 hours a month, in a course lasting at least three consecutive weeks.
  • If the designated beneficiary does not pursue post-secondary education, another eligible beneficiary can be designated.
  • If the beneficiary does not pursue post-secondary education, and there is no other beneficiary, the contributor may withdraw the earnings if certain requirements are met.

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