What is an RESP?
A Registered Education Savings Plan (RESP) is a tax-sheltered account designed to help parents and others save for a child's post-secondary education. The biggest draw is the free money provided by the federal government in the form of grants.
Types of RESPs
- Individual Plan: One beneficiary, open to anyone.
- Family Plan: Multiple beneficiaries (must be related by blood or adoption).
- Group Plan: Pooled savings with other students (usually higher fees/rules).
Tax Treatment
Unlike RRSP, contributions are NOT tax-deductible. However, the investment growth and grants are tax-sheltered.
When the student withdraws the money, the growth and grants (EAP) are taxed at the student's income level—which is usually zero or very low.
Government Grants Explained
CESG (Basic)
The Canada Education Savings Grant is the most common grant.
- • Government matches 20% on the first $2,500/year
- • Max $500/year in free money
- • Max $7,200 lifetime per child
Canada Learning Bond (CLB)
For lower-income families, no personal contributions required.
- • Up to $2,000 total per child
- • $500 initial payment + $100/year
- • Based on family income and number of children
What happens if my child doesn't go to school?
1. Transfer to Sibling
If you have a Family Plan, you can often redirect the funds to another child in the family.
2. RRSP Rollover
You can transfer up to $50,000 of the growth into your own RRSP if you have contribution room.
3. Withdraw (Taxes Apply)
You get your original contributions back tax-free, but grants must be returned to the government.