What is an RESP?
An RESP (Registered Education Savings Plan) is an investment account designed to help you save for a child’s education. It’s an optimal way to save because the government contributes up to $7,200 per child (more in some provinces) and your RESP grows without incurring any tax until the grants and investment gains are withdrawn. And, in most cases, students benefit from this free money without paying any tax whatsoever.
How it works
Set up your RESP
It’s easy! All you need is a Social Insurance Number (SIN) for you and your child.
Grow your RESP
Between your contributions, government grants, investment income, and compounded interest, your RESP can grow substantially through the years.
Use your RESP
When it’s time for school, simply withdraw what you need from your RESP when you need it. We can help you withdraw the right way, keeping tax rates and your student’s needs in mind.
Is an RESP the best choice for education savings?
When saving for post-secondary education, RESPs are hard to beat. While other saving options exist, it is extremely difficult to match the benefits of government grants, tax-deferral, and secured growth that RESPs offer. Let’s look at a couple other options to see how they stack up.
RESP vs. TFSA
A Tax Free Savings Account (TFSA) enables tax-free growth of money you’ve saved for any purpose, including your child’s education. The main benefit of a TFSA is its flexibility: if you want to take some of the money out of your education savings to use for something else, it’s easy to do. The downsides of using a TFSA for education savings are considerable, however.
RESP vs. Investment Accounts
Asking yourself whether you could get a better rate of return by using other investment vehicles is understandable, especially if you’re a savvy investor. One might think that creating an in-trust account or formal trust might lead to optimal returns; however several downsides to this approach exist.
Free money
No matter how much you have to save, the government will top-up your savings by 20% or more to help you save for your child’s education.
Skip the taxes
When your investments grow within an RESP, they grow exponentially and without taxation until they are withdrawn. In most cases, the investment income is not taxed at all when withdrawn strategically.
Save on your schedule
While it’s always best to start early and contribute often, our RESP provides optimal flexibility, allowing your RESP to respond to changes in your circumstances.
Teach your kids about smart saving
The substantial cost of education often means getting an early start to saving is ideal. What better way to teach your child about the importance of saving, than discussing their RESP with them. It’s a smart investment and the math is simple to explain.
Not just for tuition
Tuition, room and board, books, equipment, transportation: the cost of education can add up! Thankfully, the money you’ve saved in your child’s RESP can be used for these expenses and more.
Transfer any unused portion
If any of the funds in your child’s RESP are not used for educational purposes, you have the option to move those funds to your RRSP or withdraw as an “accumulated income payment”.
