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RESP Overview

Overview

A Registered Education Savings Plan (RESP) is an effective way to save for, and capitalize on, the money available to children when they enroll in a post-secondary education program. The Government of Canada and certain provinces offer several grants to help investors build their education savings.

You can contribute a lifetime maximum of $50,000 per child, and that money can be used to invest in a variety of ways—mutual fund, ETF, GIC, stocks, bonds, etc. Funds from the account can be used only for education at universities, colleges, vocational schools, etc. Contributions are not tax-deductible, but money inside the plan and any grants they attract can grow tax-free until withdrawn for educational purposes.

Individual Plan 
Single beneficiary 
Anyone can contribute 

Beneficiary can be of any age
 
Make contributions up to 31 years after plan is opened 
Family Plan
One or more beneficiaries
Beneficiaries must be related by blood or adoption to contributor
Beneficiaries must be under age 21 at the time of inclusion in the plan
Make contributions until beneficiary is 31 years old

How Much Can You Contribute?

The annual contribution limit ended in 2007. Currently you can contribute any amount each year up to a lifetime maximum of $50,000 to each beneficiary’s RESP. If you contribute more than this amount, you will be subject to a penalty of 1% per month on the over-contribution until the excess is withdrawn.

As an incentive to help you save for your children’s education, the government offers the Canada Education Savings Grant (CESG) – a grant of 20% on the first $2,500 contributed to an RESP each year for a total of $500. If you invest a minimum of $2,500 per year, you would get the lifetime maximum grant of $7,200 over 15 years.

In January 2005, the government enhanced the CESG to encourage lower-income families to save more. To accomplish this, the CESG provides an additional 20% on the first $500 for families with net incomes of less than $45,282 (2016 amount). For families with net incomes between $45,282 and $90,563, the additional grant is 10% on the first $500 of contributions.

Net Annual Household Income Basic Grant on a Contribution of $2,500 or More Additional Grant Annual Maximum Grant
$46,605 or less 20% up to $500 20% or $100 $600
$46,606 - $93,208 20% up to $500 10% or $50 $550
$93,209 or more 20% up to $500 N/A  $500

In addition, the Canada Learning Bond (CLB) helps families of modest income save for children born after December 31, 2003. Families who receive the National Child Benefit Supplement would qualify for the initial CLB grant of $500, and $100 for each year of eligibility until the child is 15 years old.

Québec Education Savings Incentive (QESI) is a program made available to RESP beneficiaries who reside in Quebec. The incentive consists of a basic grant of up to $250 that is paid directly into an RESP opened with a financial institution that offers the QESI. Dependent on family income, up to an additional $50 per year can be added to the basic grant amount.

Saskatchewan Advantage Grant for Education Savings (SAGES) was introduced in Saskatchewan in 2013. SAGES will provide a matching grant of 10% of eligible contributions up to $250 per year or $4,500 lifetime per beneficiary.

British Columbia Training and Education Savings Grant (BCTESG) was introduced in British Columbia in 2015. Eligible RESP beneficiaries will receive a one-time grant of $1,200.

Who Should Invest?

  • Parents who want to prepare for rising education costs and save for their child’s education.
  • Grandparents – RESPs are an effective way to pass money to grandchildren to use for education costs.
  • Anyone (friends, aunts, uncles, cousins) who wants to support the education of a child that is close to them.

Additional Information

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