The Registered Education Savings Plan (RESP) is the most popular of the savings vehicles for children and is one of the best ways to invest in their future. It enables you to put money aside and have it grow on a tax-deferred basis until your children start their postsecondary education. Moreover, the government grants that are added to your contribution are equivalent to a return of at least 30%1. It’s a good way to give your children or grandchildren a helping hand!
To open an RESP, you must provide the child’s social insurance number. Apart from the substantial grants, the principle of the RESP is to let capital grow on a tax-deferred basis for as long as possible.
To obtain grants, the account must be established before the beneficiary turns 16 years of age. Since 1998, grant rights (unclaimed amounts of the Basic CESG) have accumulated for children until the end of the calendar year in which they reach the age of 17, even if no RESP has been opened in their name.
The rights to unused grants for the current year are deferred to the following year, provided that the child continues to be eligible.
Once postsecondary studies begin, the beneficiary may start withdrawing money from the RESP each year.
|INDIVIDUAL RESP||FAMILY RESP|
|BENEFICIAIRIES||A single beneficiary who does not have to be related to the subscriber||One or more beneficiaries who are related to the subscriber by blood or adoption|
|AGE LIMIT||No age limit||
Beneficiaries must be under the age of 31
|ALLOCATION AMONG BENEFICIARIES||
Contributions, withdrawals and educational assistance payments are related to a single beneficiary
|Contributions are allocated among the beneficiaries by the subscriber|
|IF THE BENEFICIARY DOES NOT PURSUE A POSTSECONDARY EDUCATION||A new beneficiary may be designated
||The other beneficiaries may benefit from the contributions
1 When you contribute to an RESP, you are entitled to a federal grant (the Canada Education Savings Grant, or CESG) equivalent to 20% of the amount contributed, to a maximum of $500 a year with a lifetime limit of $7,200. In addition, Quebec residents are entitled to a Quebec government grant (the Quebec Education Savings Initiative, or QESI) equivalent to 10% of the amount contributed, to a maximum of $250 a year with a lifetime limit of $3,600.