Registered Education Savings Plan – RESP

What is registered education savings plan a registered education savings plan (resp) is a savings plan designed to help canadian parents save for their children’s post-secondary education.

Highlights

The resp is registered with the canadian government and provides tax advantages to help parents save for their child’s future education. The resp allows parents, grandparents or other family members to contribute funds into the plan, which can then be invested in various financial products such as stocks, bonds, mutual funds, and more.

The earnings on these investments grow tax-free until the child is ready to attend a post-secondary institution. When the child is ready to attend post-secondary education, the funds in the resp can be withdrawn to pay for tuition, textbooks, and other eligible expenses.

The withdrawals are taxed as income for the student, who typically has a lower tax rate than the contributor. Overall, the resp is an excellent way for canadian families to save for their children’s education and receive tax benefits while doing so.

What are the benefits of resp?

A registered education savings account (resp) is a savings account that can help parents save for their child’s post-secondary education.

Here are some of the benefits of having an resp:

Government grants: when you contribute to an resp, the government provides grants to help you save for your child’s education. For example, the canadian government provides a canada education savings grant (cesg) of up to $500 per year, depending on the contributions made.

Tax-free growth: the investment income earned in an resp is tax-free until it is withdrawn to pay for education. This means that the money in the account can grow faster than in a regular savings account.

Flexibility: you can use the money in an resp to pay for post-secondary education expenses such as tuition fees, books, and living expenses. If your child decides not to pursue post-secondary education, you can transfer the resp to another child or withdraw the money (subject to tax).

Contributions can be made by anyone: anyone can contribute to an resp, including grandparents, aunts, uncles, and family friends. This can help to increase the amount of money available for the child’s education.

Encourages savings: an resp encourages parents to save for their child’s education, which can reduce the financial burden of paying for post-secondary education. By starting early and contributing regularly, parents can build a substantial amount of savings to help their child achieve their educational goals.

Types

We can categorize the resp into two types in canada, there are two main types of registered education savings accounts (resps): individual resp and family resp.

Individual resp: as the name suggests, an individual resp is meant for one beneficiary. This account is opened for a single child, and only one person can contribute to it.

Family resp: this type of resp allows the account holder to name multiple beneficiaries, such as siblings, and can be opened for any member of the family. Family resps have a higher contribution limit than individual resps and may be a better option for families with multiple children.

Both types of resps offer tax-deferred growth, meaning that the earnings on the contributions are not taxed until they are withdrawn.

Additionally, the canadian government offers grants and incentives to encourage families to save for their children’s post-secondary education, including the canada education savings grant (cesg) and the canada learning bond (clb), which are available to both individual and family resps.

Common Registered Education Savings Plan Questions.

Can we transfer Resp?

If your child does not wish to pursue higher education, you may transfer the resp accumulation to another child. Please note one can only transfer contributions, because government grants are specific for each child.

Is there any limit on resp contribution?

A registered education savings account (resp) is a savings plan that can help parents and other individuals save for a child’s post-secondary education. The contribution limit for an resp depends on various factors, including the age of the beneficiary and the amount of contributions made in previous years. Here are some key points to keep in mind:

-There is no annual contribution limit for an resp. However, there is a maximum lifetime contribution limit of $50,000 per beneficiary.

-The canada education savings grant (cesg) provides a 20% matching grant on the first $2,500 in annual contributions to an resp, up to a maximum grant of $500 per year.

-There is a lifetime cesg limit of $7,200 per beneficiary.

-The canada learning bond (clb) is a government grant that is available to low-income families to help save for their child’s education. The clb provides an initial payment of $500, followed by $100 per year for up to 15 years.

-The lifetime clb limit is $2,000 per beneficiary. It’s important to note that contribution limits and government grant programs can change over time, so it’s always a good idea to check with the canada revenue agency or a financial advisor for the latest information.

Resp age limit

There is no maximum age limit for the beneficiary (the child who will be receiving the funds from the resp). The account holder (the person who opens and manages the resp) can make contributions until the end of the year in which the beneficiary turns 17 years old. Anyone can contribute to an resp, including parents, grandparents, relatives, or family friends.

What is the resp withdrawal limit?

There is no cap on withdrawals for pse (post-secondary education). On the other side, withdrawals from the eap (education assistance payment) are limited to $5000 for full-time and $2500 for part-time students. Education assistance payments (eaps): eaps are the withdrawals made from the resp to pay for a child’s post-secondary education. The maximum amount of eaps that can be withdrawn each year is determined by the educational institution and varies depending on the program of study. Cesg (canada education savings grant) repayment: if you withdraw money from an resp and do not use it for a qualifying educational purpose, you may have to repay some or all of the cesg grants that were paid into the account.

Is resp a great idea?

Yes, a resp is the best investment for your child. Let us help you fulfil your childs education dreams today.