What is an RESP?

Registered Education Savings Plans (RESPs) are tax sheltered education savings plans registered by the Canadian government. RESPs are a great opportunity for Canadians to invest in a child’s post-secondary education.

The subscriber (often a parent or grandparent) opens an RESP and contributes funds to the plan that help pay for the future post-secondary education costs of the beneficiary (often a child or grandchild).

What makes RESPs special is that, although the contributions to it are not tax-deductible, the income earned on them is sheltered from tax if it remains in the plan. At the time of withdrawal, the income tax is charged to the beneficiary, but as most beneficiaries have little to no income, they usually end up paying little to no taxes.

Another benefit is that contributions to an RESP can also attract government grants, which increases the amount available to the child.