Are you familiar with Registered Education Savings Plans (RESPs)? They’re a useful investment account that can help families prepare for the rising cost of post-secondary education by allowing savings to grow tax-free until they are withdrawn for educational purposes. RESPs can be opened by parents, grandparents, or relatives and they offer flexibility in contributions, beneficiaries, and investment choices. Personal savings are enhanced through government programs such as the Canada Education Savings Grant (CESG), which matches 20% of the first $2,500 contributed annually, up to a lifetime grant maximum of $7,200, with additional grants potentially available based on family income.
It’s beneficial to open an RESP early because contributions can compound over time, with a lifetime contribution limit of $50,000 per beneficiary. When a child attends a qualifying post-secondary institution, they can receive Educational Assistance Payments (EAPs) to help cover tuition, living expenses, and course materials; these payments are generally taxable to the student. An RESP can remain open for up to 36 years, allowing flexibility if education is delayed. If a child never attends post-secondary school, the original contributions can be withdrawn tax-free, while government grants must be repaid and investment growth may be subject to income tax.