What is a RESP?
RESP stands for Registered Education Savings Plan. It is a way to save money for a child’s education after high school. Money in the RESP grows tax-free and can be used to pay for tuition, books, and other expenses related to post-secondary education. There are two types of RESP: individual and family. An individual RESP is set up for one child, while a family RESP can be used by multiple children in a family. The main benefit of an RESP is that it can help families save for their children’s education while getting a break on their taxes.
Who can open a RESP?
The plan is usually set up by a parent or grandparent for a beneficiary (the child). However, any person with a SIN can open an RESP as long as the beneficiary is a resident of Canada. The account can be opened through most financial institutions and there are a variety of RESP providers to choose from. Not all RESPs are created equal, so it’s important to do your research to find the best RESP provider for you and your family.
How does a RESP work?
When money is deposited into the RESP, the government will provide a grant (see the Canada Educations Savings Grant summary chart below) of 20 percent of the first $2500 ($500) deposited each year. This grant is available to all families, regardless of income. For families with a lower income, there is also a supplement (Canadian Learning Bond). Specifically, the Canadian Learning Bond provides funds for children from low-income families who are eligible to receive $500 in the first year, as long as the child is under15 years old. There’s also an additional reward of $100 every year after your initial application if you qualify –- over time this amount could add up to $2,000.
The RESP can be used to cover the costs of tuition, books, and other expenses related to post-secondary education. With the rising cost of education, an RESP can be a helpful way to save for your child’s future.
Canada Education Savings Grant Summary chart
| Adjusted family net income for 2021 | Up to $49,020 | More than $49,020 but less than $98,040 | More than $98,040 |
| Additional amount of CESG on the first $500 of annual RESP contributions | 20% = $100 | 10% = $50 | Beneficiary is not eligible |
| Basic CESG on the first $2,500 of annual RESP contributions | 20% = $500 | 20% = $500 | 20% = $500 |
| Maximum yearly CESG depending on income and contributions | $600 | $550 | $500 |
| Lifetime maximum CESG for which you may qualify | $7,200 | $7,200 | $7,200 |
An RESP is a great way to save for your child’s post-secondary education. The earlier you start saving, the more money you will have when it comes time for them to head off to college or university. If you have any questions about RESPs, please reach out to us and we would be happy to help. We can also provide advice on other ways to save for your child’s education, so don’t hesitate to get in touch. Thanks for reading!
