Registered Education Savings Plan (RESP)
Start saving today for their tomorrow
A Registered Education Savings Plan (RESP) is a tax-advantaged savings plan designed to help families save for a child's education after high school.
An RESP can help fund university, college, trade school, CEGEP, apprenticeship programs and other qualifying post-secondary education. In addition to your own savings, an RESP can provide access to valuable Government of Canada education savings incentives.
Starting early gives your contributions, government incentives and investment earnings more time to grow.
Why Open an RESP?
An RESP offers several important advantages:
Government education savings incentives
Eligible beneficiaries may receive the Canada Education Savings Grant (CESG) and, for qualifying families, the Canada Learning Bond (CLB).
Tax-sheltered growth
Investment income and government incentives can grow tax-deferred while they remain within the RESP.
Flexible investment options
Depending on the RESP provider, you may be able to choose from a range of investment options suited to your time horizon and investment objectives.
Flexible contributions
There is no annual RESP contribution limit, although there is a $50,000 lifetime contribution limit for each beneficiary across all RESPs established for that beneficiary.
RESP contributions are not tax-deductible.
Canada Education Savings Grant (CESG)
The Government of Canada can help build your education savings through the Canada Education Savings Grant.
The basic CESG provides 20% on the first $2,500 contributed to an eligible beneficiary's RESP each year.
That means:
You contribute: $2,500
Basic CESG: $500
Total added to the RESP: $3,000
The CESG has a lifetime maximum of $7,200 per beneficiary.
Catching Up on Unused Grant Room
If you weren't able to contribute enough to receive the full CESG in previous years, unused basic grant room can be carried forward.
Depending on available grant room, contributing more in a future year may allow an eligible beneficiary to receive up to $1,000 of basic CESG in one year.
Starting late doesn't necessarily mean the opportunity has been lost. Your financial advisor can help you determine whether unused CESG room is available and develop an appropriate contribution strategy.
Additional CESG
Eligible low- and middle-income families may qualify for an additional CESG on the first $500 contributed each year.
Eligibility and the amount of additional CESG are based on family income and applicable government thresholds, which are adjusted periodically.
Canada Learning Bond (CLB)
Some eligible children from lower-income families can receive the Canada Learning Bond, even if no personal contributions are made to their RESP.
The CLB can provide up to $2,000 per eligible beneficiary:
An initial payment of $500 for the first eligible year
$100 for each additional eligible year, up to age 15
A lifetime maximum of $2,000
You do not have to contribute your own money to receive the Canada Learning Bond.
This makes opening an RESP worth considering even when regular contributions are not currently possible.
Eligible young adults who have not previously received the CLB may also be able to claim accumulated entitlement themselves before the applicable age deadline.
Individual or Family RESP?
There are two common types of RESP.
Individual RESP
An individual RESP has one beneficiary.
The beneficiary does not generally have to be related to the subscriber, making an individual RESP useful in a variety of family and planning situations.
Family RESP
A family RESP can have more than one beneficiary.
Family plans can be particularly useful for families with two or more children because eligible funds may provide greater flexibility among beneficiaries.
Beneficiaries of a family plan must generally be related by blood or adoption to the subscriber.
Your financial advisor can help determine which plan structure is appropriate for your family.
Choosing RESP Investments
An RESP is the account or plan—you still need to decide how the money within the plan will be invested.
Available investment choices depend on the RESP provider and may include different combinations of fixed-income and market-based investments.
The appropriate investment strategy can change as the beneficiary gets closer to needing the money for education.
When a child is young, there may be a longer time horizon for growth. As post-secondary education approaches, preserving accumulated savings and ensuring money will be available when needed can become increasingly important.
Your financial advisor can help you establish an investment approach and review it as the beneficiary gets closer to post-secondary education.
Using an RESP for Education
When the beneficiary enrols in an eligible post-secondary program, RESP funds can help cover education-related costs.
RESP withdrawals generally consist of two components.
Your Contributions
The subscriber's original contributions can generally be returned without being included in income because those contributions were made with after-tax dollars.
Educational Assistance Payments (EAPs)
An Educational Assistance Payment (EAP) consists of government education incentives and investment earnings accumulated within the RESP.
EAPs are paid to the beneficiary and are included in the beneficiary's taxable income.
Because many students have relatively little other taxable income, the actual income tax payable on EAPs may be low or nil, depending on their circumstances.
EAPs can help with reasonable post-secondary education expenses in accordance with applicable RESP rules.
What If the Beneficiary Doesn't Pursue Post-Secondary Education?
Plans and circumstances can change.
Depending on the RESP and circumstances, there may be several options, including:
Keeping the RESP open in case the beneficiary pursues education later
Changing the beneficiary where permitted
Using a family RESP for another eligible beneficiary
Transferring the RESP to another qualifying RESP
Returning unused government grants as required
Potentially transferring qualifying accumulated investment income to the subscriber's RRSP, subject to applicable rules and available contribution room
Closing the RESP and receiving eligible amounts according to the applicable tax rules
RESPs can generally remain open for many years, so an immediate decision may not be necessary if a beneficiary's education plans change.
Your advisor can help you understand the available options before withdrawing or closing an RESP.
Start Early. Review Regularly.
The earlier an RESP is established, the more opportunity there may be to benefit from government incentives and long-term investment growth.
But starting later can still be worthwhile—particularly where unused CESG entitlement may be available.
A financial advisor can help you:
Select an individual or family RESP
Review available CESG and CLB opportunities
Determine an appropriate contribution strategy
Select investments based on your time horizon
Adjust the investment strategy as education approaches
Coordinate RESP withdrawals once the beneficiary begins post-secondary education
Start Planning for Their Education
Whether you're opening an RESP for a new child, catching up on contributions or reviewing an existing education savings plan, professional advice can help you make the most of the opportunities available.
Speak with Your Advisor
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Important Information
RESP rules, government education savings incentives, eligibility requirements and income thresholds are established by the Government of Canada and may change.
The Canada Education Savings Grant and Canada Learning Bond are subject to eligibility requirements, age limits and lifetime maximums. Provincial education savings incentives may also be available to eligible beneficiaries.
Investment values may fluctuate depending on the investments selected.
The information provided is for general educational purposes only and should not be considered financial, investment, tax or legal advice. Please consult your financial advisor and, where appropriate, a qualified tax or legal professional regarding your individual circumstances.
