FAQ RESP

A Registered Education Savings Plan (RESP) is a government-registered savings plan for a child's education after high school. Your savings grow tax-sheltered, and the government adds grants to help them grow faster. When your child goes to school, the money can be used for tuition, books, rent and other education costs.

Parents, grandparents, other relatives and friends can all open an RESP. The child needs a Social Insurance Number (SIN) to be named as the beneficiary and to receive government grants.

An individual RESP has one beneficiary, and anyone can open it. A family RESP can have several children who are related to the subscriber by blood or adoption, such as siblings or grandchildren. Family plans make it easy to share savings and growth between children.

There is no annual contribution limit, but the lifetime limit is $50,000 per child. Grants are only paid on the first $2,500 per year (or $5,000 with catch-up room), so spreading contributions over several years usually earns the most grant money.

The government adds 20% on the first $2,500 you contribute each year, which is up to $500 per child per year. The lifetime maximum CESG is $7,200 per child. Lower- and middle-income families can get an extra 10% to 20% on the first $500 contributed each year (Additional CESG).

CESG can be paid until the end of the calendar year your child turns 17. Special rules apply at ages 16 and 17: the child must have had at least $2,000 contributed, or contributions of at least $100 in any 4 years, before the end of the year they turned 15.

Yes. Unused CESG room carries forward. Each year you can receive up to $1,000 in CESG (by contributing $5,000): $500 for the current year plus $500 of catch-up room, until the $7,200 lifetime maximum is reached.

The Canada Learning Bond (CLB) is extra money for children from lower-income families born in 2004 or later. It pays $500 in the first year and $100 for each following year of eligibility, up to $2,000. You do not need to contribute anything to receive it, you only need an RESP.

Universities, colleges, CEGEPs, trade schools and apprenticeship programs in Canada usually qualify, and many universities and some programs outside Canada qualify too. Both full-time and part-time studies can qualify, with different withdrawal limits.

Your original contributions come out tax-free. The grants and investment growth are paid as Educational Assistance Payments (EAPs) and taxed in the student's hands. Because most students have low income, they usually pay little or no tax on them.

You have options. You can name another child as beneficiary, or keep the plan open for up to 35 years in case your child studies later. If you close it, your contributions come back to you tax-free, the government grants are returned, and the investment growth can be transferred to your RRSP (up to $50,000 if you have room) or withdrawn with tax plus an extra 20% tax.