A Registered Education Savings Plan (RESP) is a Canadian account designed to help families save for a child’s post-secondary education. Contributions grow tax-free, and the government provides grants to boost savings.
How It Works
Parents, guardians, or relatives can contribute to an RESP on behalf of a child. The money grows tax-free, and when withdrawn for education, it is taxed in the student’s hands, usually at a low tax rate. The government also adds incentives like the Canada Education Savings Grant (CESG).
Benefits
- Tax-deferred growth: Investments grow tax-free until withdrawal.
- Government grants: The CESG matches 20% of contributions up to $500 per year, with lifetime limits.
- Flexibility: Funds can be used for university, college, or trade schools.
Final Thoughts
An RESP is one of the best ways to save for education in Canada. The combination of tax benefits and government grants makes it a powerful tool for families planning ahead.