Understanding Registered Education Savings Plans (RESPs)
A Registered Education Savings Plan (RESP) is an excellent tool for saving for a child’s education. It offers various benefits and government incentives to help you build a substantial education fund over time. Key features include:
- Income and gains within the RESP grow tax-deferred, and withdrawals are favorably taxed to the student, potentially reducing the overall tax burden
- The Government of Canada provides a cash grant of 20% of contributions, up to $500 per year per child until age 17
- Residents of Quebec receive an additional 10% grant provided by the provincial government (B.C. offers the Training and Education Savings Grant).
- The grant room is cumulative, allowing up to $1,000 in any one year
CAUTION**
The Ontario Securities Commission warns that “Group plans are only offered by scholarship plan dealers. They tend to have higher fees and more restrictive rules than other plans. If you cancel your plan in the first few years, you’ll get back much less than you put in.”
* Tradex does not offer Group Plans
The Canada Education Savings Grant (CESG) will match up to 20% of your contribution, up to a maximum of $500/year per beneficiary. The CESG has a lifetime limit of $7,200.
The Canada Learning Bond (CLB) provides up to $2,000 per child for families with a modest income. The child must be born after December 31, 2003 to qualify.
The graph above illustrates an annual combination of a $2,500 contribution and a $500 Canada Education Savings Grant, compounding at 8%, can grow to $43,460 over 10 years
Federal Grants for RESPs
The Canada Education Savings Grant (CESG) will match up to 20% of your contribution, up to a maximum of $500/year per beneficiary. The CESG has a lifetime limit of $7,200.
The Canada Learning Bond (CLB) provides up to $2,000 per child for families with a modest income. The child must be born after December 31, 2003 to qualify.
Provincial Grants for RESPs
Federal Grant: The Government of Canada provides a 20% cash grant on contributions, up to $500 per year per child until age 17.
Provincial Incentives
- Québec: The Québec Education Savings Incentive (QESI) offers a 10% grant on contributions, up to $250 annually, with additional amounts for low-income families. Unused benefits can be carried forward, with a lifetime maximum of $3,600 per beneficiary.
- British Columbia: Provides a $1,200 grant when a resident child turns six years old.
Tax Benefits: Income and gains grow tax-deferred, and withdrawals are favorably taxed to the student, reducing the overall tax burden.
Our No-Fee RESP Providers
- Mackenzie
- AGF
- Fidelity
- NEI
- Invesco
- BMO
- Franklin Templeton
- CI Investments
- Manulife
- National Bank
- TD*
RESP Withdrawals
When it’s time to withdraw funds for post-secondary our advisors will assist with developing your withdrawal plan.
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Contact us to learn more about how an RESP can benefit you or your loved ones.