If you withdraw money from an RESP before your beneficiary has enrolled in a post-secondary program, there are penalties. Here are some key things you will have to remember if you decide to withdraw:

• Government grants proportionate to the amount withdrawn will have to be returned
• The lifetime contribution limit into the RESP will be reduced by the amount withdrawn
• You will also give up the amount of grant repaid
• If you are eligible to withdraw the earnings, you’ll also have to pay taxes plus a penalty of 20% unless they are transferred to an RRSP OR RDSP, if there is room for contributions there

If all this penalty talk is scaring you there is a silver lining for you. As long as you don’t close the plan, the income you earn on your contributions will remain within the plan.