An RESP is a powerful way to save for your child’s or grandchild’s post-secondary education. It offers tax-deferred growth and partial matching from the federal government.
An RESP helps you save for your kid’s post-secondary education. It can hold various investments.
Parents, grandparents, relatives and friends can contribute money any time into an RESP – up to a lifetime total of $50,000 per child.
Any qualifying investments you have within an RESP grow tax-free until they’re withdrawn. When money is withdrawn, the educational assistance payment is taxable in the hands of your low-income/no-income child, not you.
The Canadian government provides two main types of grants to help families save for their children’s post-secondary education through a Registered Education Savings Plan (RESP): the Canada Education Savings Grant (CESG) and the Canada Learning Bond (CLB).
The CESG is a grant that provides a 20% match on the first $2,500 in annual RESP contributions, up to a maximum of $500 per year per child. This means that if you contribute $2,500 to your child’s RESP in a given year, the government will contribute an additional $500 in CESG funds.
The CLB is a grant that provides up to $2,000 in RESP contributions for eligible children born after December 31, 2003. The CLB provides an initial $500 grant and an additional $100 per year for up to 15 years, as long as the child remains eligible.
In addition to these grants, the government also provides a carry-forward provision for the CESG, which allows you to carry forward any unused grant room from previous years to a future year, as long as the child is still eligible.
It’s important to note that there are some eligibility requirements for these grants, such as the child being a Canadian resident and having a valid Social Insurance Number (SIN). The amount of government contributions to an RESP will depend on the contributions made by the account holder and the eligibility for grants.