Registered Education Savings Plan (RESP) helps you save for your children’s post-secondary education. It has tax-free growth, offers flexibility and helps you plan and save many years in advance, so you are not weighed down with the expenses at the time.
Canadian Residents with a social insurance number (SIN) who wish to set up the fund for any beneficiary including children, nephews, nieces, grandchildren or any dependent child should consider RESP.
Tax Free Growth
RESPs offer tax deferral. This means that interest income and investment growth earned within an RESP are not taxed as long as the funds remain in the plan. Withdrawals from an RESP are taxed in the hands of the student, which usually means they pay little or no tax.
The Canada Education Saving Grant
With the CESG, for an eligible beneficiary under the age of 18, the government matches 20% on the first $2,500 contributed annually to an RESP. The maximum total CESG the government will give, up to age 18, is $7,200 per beneficiary. The grant proceeds are invested along with your contributions, further enhancing the benefits of tax-deferred and compound investment growth within your plan.
Canada Learning Bond
A $500 CLB is provided for children of families who are entitled to the National Child Benefit Supplement and who are born after December 31, 2003. These children also qualify for CLB installments of $100 per year until age 15, if they continue to receive the National Child Benefit Supplement. The total maximum CLB payable per child is $2,000. CLBs are allocated to a specific child; unlike CESGs, they cannot be shared with other beneficiaries. There is no requirement to make contributions in order to qualify for the CLB.