Registered Education Savings Plans
RESP: Investing in Your Child’s Future
A Registered Education Savings Plan (RESP) is a tax-advantaged way to save for a child’s post-secondary education. For high-income families, business owners, and athletes, an RESP combines government grants with tax-deferred growth to build a strong foundation for future success.
What Is a RESP?
An RESP is a registered account under the Canadian Income Tax Act that allows contributions to grow tax-deferred, with government grants like the Canada Education Savings Grant (CESG) boosting savings. Withdrawals for education are taxed in the student’s hands, typically at a low rate.
Key Features:
Government Grants: Up to $7,200 in CESG per child, plus additional grants for lower-income families.
Tax-Deferred Growth: Investment earnings are not taxed until withdrawn.
Lifetime Limit: $50,000 contribution limit per beneficiary.
Who Should Consider a RESP?
Parents and Grandparents: Plan for children’s or grandchildren’s education.
High-Income Families: Maximize grants and tax-deferred growth.
Athletes: Save during high-earning years for family education goals.
Business Owners: Use RESPs as part of a family wealth strategy.
Key Benefits
Free Government Money: CESG matches 20% of contributions (up to $500/year per child).
Low-Tax Withdrawals: Educational Assistance Payments (EAPs) are taxed in the student’s hands, often at minimal rates.
Flexible Investments: Hold stocks, bonds, or GICs to suit your risk tolerance.
Family Plans: Cover multiple children under one RESP for efficiency.
Rollover Options: Unused funds can be transferred to an RRSP or refunded, subject to tax rules.
How It Works
Open an RESP: Set up through a financial institution or advisor.
Contribute: Add up to $50,000 per child over the plan’s lifetime.
Claim Grants: Apply for CESG and other grants (e.g., CLB for low-income families).
Invest: Grow funds tax-deferred with a range of investment options.
Withdraw: Use funds for post-secondary education, with EAPs taxed to the student.
Frequently Asked Questions (FAQs)
Q: How much can I contribute to an RESP?
A: Up to $50,000 per beneficiary, with no annual limit.
Q: What qualifies as “post-secondary education”?
A: Most colleges, universities, and trade schools, including part-time or international programs.
Q: What happens if my child doesn’t pursue education?
A: You can transfer funds to another child, roll up to $50,000 into an RRSP (if you have room), or withdraw funds with tax penalties on earnings.
Q: Are grants taxable?
A: CESG and earnings are taxed as EAPs in the student’s hands upon withdrawal.
Q: Can non-residents contribute to an RESP?
A: Yes, but grants are only available to Canadian residents.
Why Choose New World Agency?
We help high-performance families secure their children’s future with tailored RESP strategies. Our team works with your advisors to maximize grants and growth, ensuring your education savings align with your broader financial plan.
Build Your Child’s Future
An RESP is more than savings—it’s an investment in opportunity. Let us help you get started.