A Registered Education Savings Plan (RESP) is a special savings account that can help you, your family or friends start saving now for your child’s education after high school. The Government of Canada registers RESP’s so savings for education can grow tax-free until the person named in the RESP enrolls in studies after high school.
What are the benefits of opening an RESP?
When you open an RESP account for your child, the Federal Government will help you save by adding money to your RESP through special savings incentives. These incentives are called the Canada Education Savings Grant and the Canada Learning Bond. They are only available if you open an RESP. As for eligibility, anyone, including parents, guardians, grandparents, other relatives or friends, can open an RESP account for your child.
You can open an RESP account through a financial institution such as a bank or credit union or through a certified financial planner or group plan dealer. Institutions and organizations that offer RESP accounts are known as “RESP providers.”
The amount of money you put into an RESP depends on the type of RESP you choose. Some RESP’s have no minimum deposit requirements. Before you choose an RESP, shop around among different RESP providers to find the plan that best meets your needs.
For each child named, you can put up to $50,000 into an RESP. There is no annual contribution limit. Note that the Government will only add a grant on the first $2,500 saved annually.
Every RESP is different. Some types of RESP’s require specific monthly contributions. Others let you put money into your RESP whenever you want. The sooner you start to save, the more your money will grow. Even savings of $5.00 a week can add up quickly, especially when government grants and earned interest are added to your savings.
You can even open an RESP for yourself. There is no age limit for opening an RESP. You can open a plan for a child, or you can name yourself or another adult as the beneficiary of your plan. An RESP allows adults to earn interest on their education savings tax-free.