A Registered Education Savings Plan (RESP) is a government-supported savings account designed to help Canadians save for a child’s post-secondary education. Contributions to an RESP grow tax-free, and the government provides additional incentives through grants.

 

Key Features of RESPs

 

• Tax-Advantaged Growth

  • Investments inside an RESP grow tax-free until withdrawn for educational purposes.

• Government Grants

  • Canada Education Savings Grant (CESG): This grant matches 20% of annual contributions up to $500 per year, with a lifetime maximum of $7,200 per child.

  • Canada Learning Bond (CLB): Provides up to $2,000 for low-income families without requiring contributions.

• Wide Range of Investments

  • RESPs can hold mutual funds, ETFs, GICs, stocks, bonds, etc.

• Contribution Limit

  • Lifetime contribution limit of $50,000 per child. There is no annual contribution limit.

• Taxable Withdrawals for the Beneficiary

  • When the funds are withdrawn, they are taxed in the beneficiary’s hands. The beneficiary typically has little to no income, leading to minimal taxes.

 

Why RESPs Are Good​

• Free Government Money

  • The Canada Education Savings Grant (CESG) and Canada Learning Bond (CLB) significantly boost savings without additional effort.

• Tax Efficiency

  • Contributions grow tax-free, and withdrawals are taxed at the usually lower rate of the student.

• Encourages Education

  • Funds must be used for qualified educational programs, including universities, colleges, trade schools, and some international programs.

• Flexibility in Beneficiaries

  • If one child does not use the funds, the account holder can transfer them to another beneficiary or use them for personal retirement savings, subject to certain conditions.

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Considerations

 

• Penalties for Non-Educational Use

  • If the child does not pursue education, grants must be repaid, and earnings are subject to taxes and penalties.

• Contribution Limits

  • There’s a lifetime cap and contributions beyond this limit may incur penalties.

• Investment Risks

  • The RESP value can fluctuate depending on the chosen investments, which may affect the total available funds.

• Account Management

  • RESP rules can be complex, especially regarding withdrawals (Educational Assistance Payments vs. contributions), requiring careful management.

 

Who Should Use an RESP?

 

RESPs are best for:

• Parents or Guardians: Looking to save for their child’s education and benefit from government grants.

• Low-Income Families: The CLB provides funds even if no contributions are made.

• Grandparents or Family Members: Can contribute to RESPs as additional savings for a child’s future education.

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RESPs are powerful ways to save for education. They combine tax advantages with government incentives to make post-secondary education more affordable for Canadian families.​

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To get more details as regards opening an account, investments in your RESP, withdrawals, tax deductions etc....please review and refer to the CRA resource pages 

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You can track your RESP contribution room with the CRA, and review transactions within your FHSA using the CRA My Account portal. 

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• Logging into the Canada Revenue Agency's (CRA) My Account self-service portal

• Contacting the CRA at 1-800-267-6999,

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You can log in to the CRA My Account portal using your bank information or directly through the CRA. If you don't have an account, you can register and follow the instructions.