Registered Education Savings Plans

While most Canadians have likely heard of Registered Education Savings Plans (RESPs), many are still not clear how they work and could be missing out on key opportunities.

An RESP is a tax-deferred savings account to help parents, grandparents and others save for a child’s post-secondary education. Subscribers, typically parents but can be anyone, open the RESP and make contributions for the plan’s beneficiaries.

While your child is under 18, your contributions are generally eligible for a matching federal government contribution, called the Canada Education Savings Grant (CESG). This grant matches 20% (and in some cases more), of your contribution, up to an annual maximum of $500 and lifetime maximum of $7,200 per child. Additionally, the Canada Learning Bond (CLB) may be available for children in lower-income families.

There is no annual limit on the RESP contributions you can make, but your annual contribution required to maximize the CESG is $2,500. RESPs do have a lifetime contribution limit of $50,000 per child. CESG and CLB payments aren’t included in this maximum.

How do RESPs work?

Eligibility requirements

Typically, it’s parents or grandparents setting up an RESP to save for the future post-secondary education of their children or grandchildren. They are known as the plan’s subscribers. However, anyone can open an RRSP account, and anyone can be a beneficiary. It may be a brother, sister or spouse.

The subscriber owns the funds and makes the contributions. They are required to be a Canadian resident. A maximum of two subscribers per RESP are allowed, providing they are spouses. Grandparents can also be joint subscribers if they are spouses. The beneficiaries, usually the children or grandchildren who will draw on the funds to finance their education, must also be Canadian residentsand have a valid Social Insurance Number (SIN).

If the RESP is a family plan, there can be multiple beneficiaries, but they are required to be related to the subscriber. This would include children, stepchildren, grandchildren or siblings. Nieces and nephews are not eligible. Beneficiaries must also be under age 21 when the plan is opened. If the RESP is an individual plan the subscriber and beneficiary can be anyone of any age, but there can only be one beneficiary.

CESGs and CLBs have additional eligibility requirements. CESGs are only available up until the end of the calendar year when the child turns 17. The CLB is specifically offered to low-income families for children born after January 1, 2004.

Eligible educational institutions

The list of post-secondary schools you can save for through an RESP is extensive. It includes universities, community colleges, vocational colleges and technical colleges across Canada, plus many universities internationally. 

Other educational institutions that provide approved post-secondary courses and degrees may also qualify. Programs must be a minimum of 13 weeks long and 10 hours per week of classes.

Even if your child isn’t interested in college or university, there are many other RESP qualifying schools and programs. These include trade schools, hair stylist programs and CEGEPs in Quebec. The Government of Canada website has a complete list of designated educational institutions.

Speak to us today to find out what is the right fit for you!