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Registered Education Savings Plans - RESPs

If you are expecting a child, have children, or grandchildren, you may be thinking about saving for their post-secondary education. Tuition rates are rising, and the best way to ensure that your child can afford an education is to start saving early. The financial services industry offers a range of products to help you save for your child's education, but as with any purchase you should shop around.

Registered Education Savings Plans (RESPs) have become a popular way to save since 1998, when the federal government introduced the Canada Education Savings Grant (CESG). The basic CESG provides 20 cents on every dollar you contribute, up to a maximum of $500(lifetime maximum of $7,200 total per child) on an annual contribution of $2,500. If you cannot make a contribution in any given year, you may be able to catch up in future years. This grant is available up until the end of the calendar year in which the child turns 17.

Depending on the child's primary caregiver's net family income, Click here for Income Levels, he or she may also be eligible to receive the Additional Canada Education Savings Grant (A-CESG). This grant adds an additional 10% or 20% onto the first $500 put into the RESP.

What is an RESP?

An RESP is an education savings plan registered under the Income Tax Act. There are many types available so investigate the risks, costs and cancellation policies. Unlike contributions to a Registered Retirement Savings Plan (RRSP), RESP contributions are not tax-deductible. However, an RESP allows your contributions to grow tax-free.

If you would like more information about the CESG program, Human Resources Development Canada (HRDC) publishes a list of Frequently Asked Questions about the CESG on their website: www.esdc.gc.ca. The Canada Revenue Agency has additonal information on RESPs on their website


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