If you withdraw money from an RESP before your child 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• Government grants proportionate to the amount withdrawn will have to be returned
• The lifetime contribution limit into the RESP will be reduced by the amount withdrawn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.

Some plans let you cancel without penalty. For example, at CST Spark, we get that from time to time, you might change your mind. That’s why we let subscribers withdraw their contributions within the first 60 days of the plan, penalty-free!