Registered Education Savings Plans (RESP)

An RESP is a plan put in place by the federal government to help parents, guardians, grandparents etc. to save for children’s education.   Currently a child’s four year degree at University will likely cost in excess of $60,000, every little bit of help is needed.

RESP contributions are not tax deductible but through the RESP the government will contribute 20% of the subscriber’s contribution to a maximum subscriber contribution of $2,500 per child, per year of the child’s life up until the year in which the child turns 17.  If you contribute $2,500 the government will add $500 in grant money to the plan for a total of $3000 a year.  If you miss a year or start once the child is older you may go back and get the matching grant for one additional year in a calendar year.  Low income families may be eligible for further grants through the Educational Savings Bond which is income dependent. Maximum CESG $7,200 life time per child.

Grant and growth on the investments will be sheltered from tax until the child withdraws them to attend post-secondary education. The initial money contributed by the subscriber is not taxable when it is redeemed. The grant and growth of the investments will be taxable in the hands of the student at that time, who is unlikely to be in a taxable position. Therefore the grant and growth of the RESP may come out tax free.