Start Saving Today for Their Tomorrow

A Registered Education Savings Plan (RESP) is a tax-advantaged way to save for a child's education after high school.

RESP savings can help fund eligible university, college, trade school, apprenticeship and other post-secondary programs. Along with your own savings, an RESP can provide access to valuable government education savings grants.

Starting early gives your contributions, government grants and investment earnings more time to grow—but even if you haven't started yet, there may still be opportunities to catch up.

Why Open an RESP?

An RESP offers several important advantages. 

Government Grants

Eligible beneficiaries can receive government education savings incentives that add to the money being saved for their education.

Tax-Deferred Growth

Investment earnings and government grants can grow tax-deferred while they remain within the RESP.

Flexible Contributions

There is no annual RESP contribution limit. The lifetime contribution limit is $50,000 for each beneficiary across all RESPs established for that beneficiary.

RESP contributions are not tax-deductible.

There is no annual RESP contribution limit. The lifetime contribution limit is $50,000 for each beneficiary across all RESPs established for that beneficiary.

RESP contributions are not tax-deductible.

Canada Education Savings Grant (CESG)

The Canada Education Savings Grant can make RESP saving particularly valuable.

The basic CESG adds 20% to the first $2,500 contributed each year for an eligible beneficiary.

For example:

You contribute: $2,500
Basic CESG: $500
Total added to the RESP: $3,000

The CESG has a lifetime maximum of $7,200 per beneficiary.

Haven't Maximized the Grant?

Unused basic CESG entitlement can generally be carried forward.

Depending on the beneficiary's available grant room, additional contributions in a future year may allow up to $1,000 of basic CESG to be received in one year.

If you've started an RESP late or haven't contributed regularly, it may be worthwhile reviewing the beneficiary's available grant entitlement.

Eligible families may also qualify for additional CESG based on family income and applicable government thresholds.

Canada Learning Bond (CLB)

Eligible children from lower-income families may receive up to $2,000 through the Canada Learning Bond, even if no personal contributions are made to their RESP.

The CLB can provide:

• $500 for the first year of eligibility;
• $100 for each additional eligible year, up to age 15; and
• a lifetime maximum of $2,000.

Opening an RESP may therefore be worthwhile even when regular family contributions aren't currently possible.

An Additional $1,200 for Eligible B.C. Children

Families in British Columbia should also be aware of the B.C. Training and Education Savings Grant (BCTESG).

Eligible children can receive a one-time $1,200 contribution to their RESP from the Province of British Columbia.

No matching contribution is required.

The application window is limited: families generally need to apply between the child's sixth birthday and the day before their ninth birthday.

If you have a child in this age range, it is worth checking their eligibility before the opportunity expires.

Individual or Family RESP?

There are two common RESP structures.

Individual RESP

An individual RESP is established for one beneficiary. The beneficiary does not generally have to be related to the person establishing the plan.

Family RESP

A family RESP can include more than one beneficiary and can be useful for families with two or more children.

Beneficiaries under a family RESP must generally be related by blood or adoption to the subscriber. Family plans can also provide additional flexibility when education plans differ between children.

Parents aren't the only people who can help save for a child's education. Grandparents and other family members may also establish or contribute to an RESP, subject to the applicable RESP rules and contribution limits.

Before establishing additional RESPs for the same child, however, it is important to coordinate contributions because the lifetime contribution limit applies across all RESPs for that beneficiary.

Investing Your RESP

An RESP is the savings plan—the money within it still needs to be invested.

Available investments depend on the RESP provider and may include different fixed-income and market-based investment options.

The appropriate strategy can also change over time.

When a child is young, there may be a longer investment horizon for growth. As post-secondary education approaches, protecting accumulated savings and ensuring money will be available when needed generally becomes increasingly important.

Regularly reviewing the RESP can help ensure the investment strategy remains appropriate for both the beneficiary's timeline and your objectives.

When It's Time for School

When the beneficiary enrols in an eligible post-secondary program, RESP funds can help with education-related costs.

RESP withdrawals generally have two components.

Your Contributions

The original contributions were made with after-tax money and can generally be withdrawn without being included in income.

Educational Assistance Payments (EAPs)

Educational Assistance Payments consist of government education grants and investment earnings accumulated within the RESP.

EAPs are paid to the student and are included in the student's taxable income.

Because many students have relatively little other taxable income, the actual income tax payable may be low or nil depending on their individual circumstances.

Planning RESP withdrawals can help coordinate available contributions, grants and investment earnings throughout the student's education.

Education Means More Than University

RESPs aren't limited to traditional four-year university programs.

Depending on the program and institution, RESP funds may be available for eligible:

• universities;
• colleges;
• trade and vocational schools;
• CEGEPs;
• apprenticeship programs; and
• other qualifying post-secondary programs.

Considering a skilled trade? RESP savings may also be available for eligible apprenticeship and trades programs. Learn more about using an RESP for an apprenticeship.

This flexibility can make an RESP valuable even when you don't yet know what educational path a young child will eventually choose.

What If They Don't Pursue Post-Secondary Education?

Plans change, and an RESP does not necessarily have to be closed simply because a beneficiary doesn't attend post-secondary school immediately.

Depending on the plan and circumstances, options may include:

• keeping the RESP open in case education is pursued later;
• changing the beneficiary where permitted;
• using a family RESP for another eligible beneficiary;
• transferring the RESP to another qualifying RESP;
• returning unused government grants where required; or
• potentially transferring qualifying accumulated investment income to an RRSP, subject to applicable rules and available contribution room.

An RESP can generally remain open for up to 35 years. Certain specified plans for beneficiaries eligible for the Disability Tax Credit may remain open for up to 40 years. This can provide considerable flexibility if education plans change or are delayed.

Start Early. Review Regularly.

Whether you're a parent or grandparent, an RESP can play an important role in preparing for a child's future education.

An RESP review can help determine whether you are:

• taking advantage of available government grants;
• catching up on unused CESG entitlement;
• using an appropriate contribution strategy;
• investing appropriately for the beneficiary's time horizon; and
• preparing for withdrawals as post-secondary education approaches.

Let's Talk About Education Savings

Whether you're opening an RESP for a new child, helping a grandchild, catching up on contributions or preparing to make withdrawals from an existing plan, MWFS can help you review the available options.

Contact MWFS to discuss your education savings plans.

Important Information

RESP rules, government education savings incentives, eligibility requirements and income thresholds may change. Government grants are subject to eligibility requirements, age limits and other conditions.

Investment values may fluctuate depending on the investments selected.

This information is provided for general educational purposes and should not be considered financial, investment, tax or legal advice. Individual circumstances should be reviewed with an appropriate professional.