Everything you need to know about RESPs in Canada

What’s a RESP?

A RESP stands for Registered Education Savings Plan. A RESP is a registered account with the federal government to allow Canadians to save for a child’s post-secondary education.

RESP is advantageous for two reasons:

• Government contributions: The federal government contributes into the account with the Canada Education Savings Grant (CESG) and the Quebec government contributes as well with the Quebec Education Savings Incentive (QESI).
• Within a RESP account, revenue growth generated from investments such as capital gains, dividends or interests will not be taxed by the Canadian government until it’s withdrawn from the account.

How much can you contribute?

You can contribute up to $50,000 per child over the lifetime of a RESP account. There is no annual contribution limit, as long as the lifetime cap is not exceeded.

How much does the government contribute?

Canada Education Savings Grant (CESG):

For each year, the federal government provides a grant of 20% of what you contribute, up to a maximum of $500 annually, per child. The lifetime maximum contributions by the federal government amounts to $7,200.

Quebec Education Savings Incentive (QESI):

In addition, if you are in Quebec, the provincial government adds a grant of 10% of what you contribute, up to a maximum of $250 annually on top of the federal grant. The lifetime maximum contributions by the Quebec government amounts to $3,600.

With both, you can receive up to $750/year in grants to save for your child’s education.

Lower-income households benefit from extra grants.

What is allowed to be held in a RESP?

Many other types of investment vehicles can be held within a RESP account, including:

• Guaranteed investment certificate (GICs)
• Bonds
• Stocks
• Exchange traded funds (ETFs)
• Mutual funds

FAQs

What type of post-secondary programs allows the use of funds within a RESP account?

The RESP has flexibility, and funds can be used for a variety of programs in university, college, or trade school.

Disclaimer:

The information provided on this page is intended to provide general information. The information does not take into account your personal situation and is not intended to be used without consultation from accounting/tax professionals. Wealth Illustrated will not be held liable for any problems that arise from the usage of the information provided on this page.