Registered Education Savings Plan

Registered Education Savings Plan

What Is A Registered Education Savings Plan?


A Registered Education Savings Plan or RESP is a savings plan. It promotes the financial security of a child by allowing contributions to be made which are followed by government grants. These grants and contributions can be taken out tax-free but on certain conditions. Originally, the amount is taxed but since young adults typically make less money, they’re able to take the money out with tax. Contributions can be made up until the age of 18. However, individuals that contribute to an RESP will not get a tax reduction like how they would with an RRSP.



There can be many pros that are attached to creating an RESP. Along with the fact that you’re saving towards your child’s education, there is a high contribution limit. This limit is a lifetime contribution $50,000.00 per child, that being said the government matches a certain portion of this money in grants. The government will grant a maximum of $2,500.00 per year until the grants reach $7,200.00. However, an individual can have multiple RESP plans at the same time. The maximum for all of them combined is still $50,000.00. Lastly, if the child or beneficiary decides that they do not want the money, it is then returned back to the contributor¬†tax-free!



Although this is an amazing plan to be investing in, it does have some drawbacks. For example, if the child does not attend any sort of post-secondary education, the government is able to request that their grant money is returned. Also, if the money is taken out for any reason other than school, will incur income tax and a hefty 20% penalty. Therefore, this plan needs to be used for only educational purposes and nothing else!


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