A Guide to Registered Education Savings Plans (RESPs) for Parents and Grandparents

Investing in your child or grandchild’s future is one of the most meaningful gifts you can give. A Registered Education Savings Plan (RESP) is a tax-advantaged way to save for post-secondary education in Canada.

Here’s everything you need to know to get started.

• What is a RESP

• Why Open a RESP

• Who Can Open a RESP

• Types of RESP’s

• Government Grants & Incentives

• How to Open a RESP

• Withdrawing Funds

• What Happens if the Child Doesn’t Go to School

What is a RESP?

A Registered Education Savings Plan (RESP) is a government-registered 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.

Why Open a RESP?

• Government Grants: The Canada Education Savings Grant (CESG) matches 20% of contributions, up to $500 per year per child, with a lifetime maximum of $7,200.
• Tax-Free Growth: Investments within the RESP grow tax-free until withdrawn.
• Flexibility: Funds can be used for various post-secondary programs, including university, college, trade schools, and apprenticeships.
• Gift for the Future: Parents and grandparents can contribute to ensure children have financial support for education.
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Who Can Open a RESP?

Anyone can open a RESP for a child, including parents, grandparents, and other family members. The person who opens the account is the subscriber, and the child is the beneficiary.

Types of RESPs

1. Individual RESP – One beneficiary; ideal if only one child is being supported.
2. Family RESP – Multiple beneficiaries, provided they are related to the subscriber by blood or adoption; best for families with more than one child.
3. Group RESP – A pooled investment plan with structured contributions; less flexible but managed by financial institutions.

Government Grants & Incentives

• Canada Education Savings Grant (CESG): 20% on annual contributions up to $2,500 per year, plus additional grants for lower-income families.
• Canada Learning Bond (CLB): Provides up to $2,000 for lower-income families, even if no contributions are made.

How to Open a RESP

Contact your Stark & Marsh advisor, and we can assist in opening an RESP. We will require the child’s Social Insurance Number (SIN).

Withdrawing Funds

When the beneficiary enrolls in an eligible program, funds can be withdrawn as:

• Educational Assistance Payments (EAPs): Grant money and investment growth withdrawn and taxed in the student’s hands (typically at a lower tax rate).
• Post-Secondary Education (PSE) Withdrawals: Subscriber contributions can be withdrawn tax-free.

What Happens if the Child Doesn’t Go to School?

If the beneficiary doesn’t pursue post-secondary education, options include:

• Transferring funds to another eligible beneficiary.
• Rolling over up to $50,000 into an RRSP (if contribution room allows).
• Withdrawing funds (grants must be returned to the government, and investment gains are taxable).

Get Started Today

Contact your Stark & Marsh advisor today and we can assist in opening your RESP.