An RESP is designed to help pay for postsecondary education and is registered with the Canada Revenue Agency (CRA). The person putting money into the plan (the subscriber) is free to choose how much to contribute, up to a maximum amount, and when and where to invest the money. No tax is paid on any investment earnings until the money is withdrawn.
Factors to consider
Flexibility
- RESP savings can be placed in a wide variety of investments.
- The subscriber chooses how much and how often to contribute, and how the contributions will be invested, up to a maximum lifetime amount of $50,000 per beneficiary.
- Allows for joint subscribers (must be spouses)
- The original contributions belong to the subscriber and do not have to be used to fund the beneficiary’s education. The subscriber can withdraw them at any time, but withdrawal may trigger the repayment of grant money to the government.
- Beneficiaries can be changed according to plan rules.
- If the beneficiary does not pursue post-secondary education, there are several options available for closing the RESP.
Fund your child’s education for free…
just by investing government grants
Canadians can save for education, even without investing their own money.
Simply by investing their Universal Child Care Benefit (UCCB) and making use of government grants, parents can save a significant amount for a child’s post-secondary education.
Here’s how you can combine government grants to potentially build substantial education savings:
- You can arrange to have your Universal Child Care Benefit (UCCB) of $160 per month until age six and $60 per month thereafter through age 17 automatically invested in an RESP.
- A Canada Education Savings Grant of 20 cents for every dollar you invest will also be deposited into the RESP (subject to annual and lifetime maximums).
- The entire amount will be tax-deferred.
- Potential RESP savings over 18 years using government-only programs
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