How RESPs work

A Registered Education Savings Plan (RESP) is a dedicated savings plan to help you save for a child’s education after high school.

Most RESPs are opened for children, but you can open an RESP for yourself or another adult. The person who opens the plan is called the subscriber.

When your child enrols in post-secondary education, they can start taking payments, called educational assistance payments (EAPs) from their RESP. EAPs are made up of the investment earnings and government grant money in the RESP. The person who is named to receive EAPs under the plan is called the beneficiary.

7 things to know about RESPs

  1. Your savings grow tax free. There is no tax on the investment earnings, as long as they stay in the plan.
  2. If you save for a child age 17 and under, the federal government also puts money into the RESP as a grant or bond. In some provinces, the provincial government may contribute too.
  3. You can usually put money in whenever you want, up to a lifetime maximum of $50,000 per child. But some plans require set monthly or annual contributions.
  4. The contributions are not tax deductible. But you can withdraw them tax free from the plan at any time for any reason.
  5. There is a wide range of investment options available for RESPs. Examples: stocks, bonds, mutual funds, GICs. Some plans let you decide how to invest your savings. Others invest your money for you.
  6. Your child can take money out of the RESP when they enrol in university or college or another qualifying education program or specified education program.
  7. An RESP can stay open for up to 36 years. Under specified plan rules, the plan can stay open for up to 40 years for beneficiaries eligible for the disability tax credit.

Learn more about how RESPs work.

Where to open an RESP

Companies that offer RESPs are called providers. There are two main types of providers:

  1. Financial institutions – includes banks, credit unions, mutual fund companies, investment firms and trust companies. They offer individual and family plans.
  2. Scholarship plan dealers – companies that only sell RESPs. They offer individual, family and group RESPs.

Use this RESP calculator to estimate how much you need to save each year for your child’s education.

Fast facts

Between 1995 and 2015, the average cost of 1 year of undergraduate tuition in Canada nearly tripled from $2,333 to $6,191.
Source: Statistics Canada

Caution

You have 60 days to cancel plans provided by scholarship planScholarship plan A type of Registered Education Savings Plan (RESP) that pools together the money of many investors. An investment manager invests the money for you, often in lower-risk, fixed-income investments such as bonds and GICs. Enrolment fees are often high and there may be strict rules.+ read full definition dealers without any penalty. Be sure to read and understand the rules outlined in the short Plan Summary provided in the plan prospectusProspectus A legal document that sets out the full, true and plain facts you need to know about a security. Contains information about the company or mutual fund selling the security, its management, products or services, plans and business risks.+ read full definition.

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