As a parent, the daunting task of financing your child’s education is likely on your mind. Fear not, for the Registered Education Savings Plan (RESP) is here to provide a solution to the escalating costs of tuition. Through Canada’s benefits of RESPs, you not only receive government contributions towards your child’s educational journey but also enjoy various tax advantages. Let’s delve into the realm of RESP and discover the possibilities it holds.


Unlocking the Benefits of RESPs: A Path to Affordable Education

If you’re a parent, you’ve likely pondered how to finance your child’s education. Enter the Registered Education Savings Plan (RESP), a powerful solution to combat the rising costs of tuition. Through Canada’s RESP, you not only receive government contributions towards your child’s future education but also enjoy additional tax advantages.

Benefits of RESPs

How does it work?

You can contribute up to $50,000 per child (the lifetime maximum) to an RESP. The great news is that there is no annual limit, allowing your contribution to vary each year. The government matches 20% of your annual contribution with the Canada Education Savings Grant (CESG), up to a maximum of $500 per year. The maximum lifetime contribution the government will make for children under 17 is $7,200. That’s quite enticing!


Choosing the right plan

Family RESPs allow you to name multiple children who are related to you as beneficiaries. Individual RESPs, on the other hand, can name a single child who doesn’t have to be related to you. As with any investment, it’s crucial to understand how the account functions and be aware that your RESP provider doesn’t guarantee returns.


Tips to jump-start your savings

  • Instead of toys and trinkets, encourage friends and relatives to make contributions to your child’s RESP on special occasions.
  • Utilize your tax refund as a contribution that won’t be missed.
  • Establish a regular direct deposit from your bank account for consistent savings.
  • Allocate the Canada Child Benefit received each month towards the RESP by setting up a separate account for monthly transfers.
  • If your child has income, encourage them to invest in their education by making monthly payments.


What if my child decides not to pursue post-secondary education?

In the event that your child opts not to pursue higher education, you have options. You can transfer the savings to an RESP for your other children or, if you have contribution room, move the balance (tax-free!) to a Registered Retirement Savings Plan (RRSP). Before making any decisions or changes, it’s advisable to wait and see if your child’s plans change. RESP accounts can remain open for up to 36 years.

Benefits of RESPs

Are RESP contributions tax-deductible?

Unlike RRSP contributions, RESPs are not tax-deductible. However, the growth within these accounts is tax-free until withdrawal. If your child uses the savings for post-secondary education, the RESP funds are taxed on their tax return at generally lower rates. They can expect to receive a slip to properly report the income on their tax return.


With RESPs, it’s hard not to love the benefits. It’s not every day that the government provides financial assistance, so seize this opportunity! Keep a close eye on your investment, ask questions, understand the risks, and maximize the matched funds from the CESG. By doing so, you can ensure the availability of funds when your child needs them.