Enrolling in post-secondary education can be expensive. The Registered Education Savings Plan (RESP) is a dedicated savings plan designed to help you save for a child’s education after high school. Learn more about how RESPs work, the types of RESPs, and the fees involved.
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What is an RESP?
The registered education savings plan (RESP) is a savings plan. It’s designed to help you save for post-secondary educational programs. Like tax-free savings accounts (TFSAs), RESPs can be used to hold savings deposits or investments. Your savings grow tax-free while in the account. However, your contributions are not tax-deductible.
Withdrawals from an RESP can be used for qualifying post-secondary educational programs including university, college, or other designated educational institutions.
Most RESPs are opened for children, but you can open an RESP for yourself or another adult. You can also open an RESP for a child even if you are not their parent.
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.
Use this RESP calculator to estimate how much you need to save each year for your child’s education.
RESP terms to know:
- Subscriber – The person making contributions to the RESP.
- Contributions – Money paid into an RESP.
- Beneficiary – The person receiving the payments from the RESP.
- Educational assistance payments (EAP) – The income paid from the RESP to the beneficiary (at the time the money is needed for education).
- Promoter – The institution making the payments from the RESP to the beneficiary.
What are the three types of RESPs?
RESPs can be opened as an individual plan, a family plan or a group plan. The type of RESP you have can make a difference in terms of how and when you contribute.
1. Individual plan – intended to pay for the education of one beneficiary. Anyone can open an individual plan, and anyone can contribute to it. You can even open a plan for yourself.
2. Family plan – can have more than one beneficiary. But each beneficiary must be related to the person who opens the plan, (for example, your children or grandchildren), and under 21 when you name them.
Contributions for individual and family plans are similar:
- You usually don’t need to make a minimum deposit.
- You decide when and how much money to put in, up to the lifetime contribution limit of $50,000 for a beneficiary.
- If you have an RESP with a financial institution, you decide how to invest your money.
- If you have an RESP with a scholarship plan dealer, your money is invested for you.
Using the money for education:
- For an individual plan, If the beneficiary doesn’t continue with their education after high school, you may be able to name another beneficiary.
- For a family plan, you decide how to divide the funds among the beneficiaries. If one of the beneficiaries doesn’t continue with their education after high school, the other beneficiaries can still use the money in the RESP.
3. Group plan – works differently from individual and family plans. Each group plan has its own rules. They also tend to have higher fees and more restrictive rules. You can open a group plan for one child. They don’t have to be related to you.
- You must make a minimum deposit when you open the plan.
- You put money into the RESP according to a schedule, up to the lifetime contribution limit of $50,000 for a beneficiary.
- The money you put in is pooled with contributions of other investors.
- All investment decisions are made for you.
Using the money for education:
- The child shares in the pooled earnings of investors with children the same age. How much the child receives depends on:
- How much money is in the group account.
- The number of children in the group who will be starting post-secondary education.
- Group plans often have additional rules about how much and how often your child can take educational assistance payments (EAPs), and which education programs are eligible.
Group plans are only offered by scholarship plan dealers. They tend to have higher fees and more restrictive rules than other plans. Learn more about Group RESPs.
How do you open and contribute to an RESP?
RESPs can be opened as an individual plan, a family plan or a group plan. Companies that offer RESPs are called providers. There are two main types of providers:
- Financial institutions – includes banks, credit unions, mutual fund companies, investment firms and trust companies. They offer individual and family plans.
- Scholarship plan dealers – companies that only sell RESPs. They offer individual, family and group RESPs.
If you change your mind about a scholarship plan
You have the right to withdraw all your money within 60 days after signing your contract for all plans offered by scholarship plan dealers (including group plans). After 60 days, you can get your money back, less any fees. Scholarship plan dealers are required to provide a prospectus that includes a short Plan Summary with the information. Be sure to read and understand this document.
When opening an RESP, make sure you’re getting the type of account that meets your needs. Consider whether you think you’ll be able to contribute monthly or annually, and whether the amount you contribute will be likely to stay consistent. This will help you determine the kind of plan that’s right for you.
When you put money into an RESP, your savings grow tax free. There is no tax on the investment earnings, as long as they stay in the plan. This means the sooner you start contributing, the more you will be able to take advantage of a longer time horizon. You’ll earn compound interest, and your investments will have more time to manage any market swings over the long term.
You can add to your RESP savings in two ways:
- Make contributions monthly or annually based on your budget. You can usually put money in whenever you want. But some plans require set monthly or annual contributions.
- Apply for government programs that will contribute to your RESP savings, through the Canada Education Savings Grant (CESG) or the Canada Learning Bond (CLB).
What government grants are available for education savings?
Saving for your child’s education can be difficult, especially if you are trying to save for multiple goals or pay down debt at the same time. When you open up an RESP, you can receive federal grants and bonds toward the child’s education, through two programs:
What is the Canada Education Savings Grant (CESG)?
The CESG is a grant that matches your contributions to an RESP, up to a maximum of $500 for each child per year. Families of any income level are eligible for the basic CESG. If your income is below a certain amount, you may qualify for additional grants as well as the Canada Learning Bond (CLB).
Your child qualifies for the CESG until the end of the year they turn 17. The lifetime limit for the grant is $7,200 for each child. There are also annual maximum limits to the grant. If your child doesn’t continue their education after high school, you can’t keep the grant money. You must return it to the government.
The CESG has two types of grants, depending on your income level:
- Basic CESG – Each year, the government will match your contribution by 20%, up to a maximum of $500 for each child. You need to contribute $2,500 a year to get the full grant of $500 each year. Unused grant contribution room carries forward until your child turns 17.
- Additional CESG – Depending on your income, the government may top up your contribution by an extra 10% or 20% on the first $500 of annual RESP contributions each year. The income eligibility requirements for the Additional CESG change annually.
There are also other important details about CESG contributions depending on the age of the beneficiary. Find out more about the CESG contributions your child may be eligible for.
To get the full Canada Education Savings Grant of $500 in a year, you must contribute $2,500 to the RESP.
What is the Canada Learning Bond?
The Canada Learning Bond (CLB) is available for lower income families. Income eligibility for the CLB is based on net family income and the number of children in the family.
The CLB provides $500 for your child at birth, and $100 for each year your family continues to be eligible.
A child is eligible for the CLB if they:
- Were born on or after January 1, 2004
- Are a resident of Canada
- Have a valid Social Insurance Number (SIN)
- Are named in an RESP
- Are from a lower income family
You don’t have to make or match any contributions to an RESP to qualify for the CLB. If your child doesn’t qualify for the CLB when you open the RESP, you can apply later if your circumstances change.
Learn more about the Canada Learning Bond.
What are the fees for RESPs?
The fees for RESPs vary widely. Fees depend on where you open the plan and how you invest your money. Find out what fees are included before you open the account. If your RESP is with a financial institution, the fees might be for:
- Opening a plan – There is usually no charge to open an RESP, however some institutions may charge a small set-up fee. Some financial institutions offer low-fee or no-fee RESP accounts for Canadians living on low incomes.
- Annual administration fee – There are often no annual fees for RESPs opened at a bank or a mutual fund company. The cost of other plans can vary. You may not have to pay an annual fee if you have enough savings in your plan, or if you hold other accounts with the same financial institution.
- Investment costs – Different investments come with different types of costs to purchase or manage them. You pay a commission when you buy stocks for your plan and when you sell them. You may pay a sales charge when you buy mutual funds for your plan or when you sell them. You’re also charged a management expense ratio (MER) for the mutual funds you hold.
- Other costs – Most plans charge fees for special services. For example, you may pay a fee if you want to change your beneficiary or transfer money to another RESP.
If your RESP is with a scholarship plan dealer, there will likely be other fees such as:
- Sales fees or commissions – Also called membership or enrolment fees. The salesperson and the company they work for get a sales fee when you open a plan. If you leave the plan early or your child doesn’t continue with their education after high school, you will not get back the sales fees you paid. Unless you decided to cancel within 60 days after signing your contract.
- Annual fees – These may include administration fees, trustee fees and deposit fees.
- Other costs – Most plans charge fees or penalties for special services. For example, you may pay a fee if you want to take out contributions early, transfer money to another RESP, or change your beneficiary. If you have a group plan, you may pay a fee to change your payment schedule.
And as with any other kind of account, review all RESP documents before signing. Be clear on any situations that would result in additional fees on your account.
Registered Education Savings Plans (RESPs) are special savings plans designed to help you save for a child’s education. If you are thinking of opening an RESP, keep in mind:
- There are three types of RESPs: Individual plans, family plans, and group plans. There are differences in how you can contribute and the kinds of fees you may be charged.
- You can contribute to an RESP through your own individual contributions or through government assistance programs called the Canada Education Savings Grant and the Canada Learning Bond.
- Savings in an RESP grows tax-free. Contributions are not tax-deductible.
- RESPs can hold both savings and investments.
- Funds withdrawn from an RESP can be used by the beneficiary (student) to help pay for education costs such as tuition, textbooks, or equipment.
- Make sure to review all documents carefully before signing.