You don’t have to be a child’s parent to open a Registered Education Savings Plan (RESP). RESPs hold savings for a child’s education after high school. Parents often open RESPs for their own children, but anyone can start an RESP for any child.
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Why open an RESP for a child
You can support a child in your extended family, or the child of a close friend in your life, by opening an RESP in their name. A common example is a grandparent opening an RESP for a grandchild. It can be a nice way of investing in a child’s future. And RESP contributions can become a recurring gift at birthdays or holidays.
The earlier you start contributing, the more time the RESP will have to grow interest. You can also use the RESP as a chance to teach the special young person in your life about how investment savings can grow.
A child can have more than one RESP
There are no limits on the number of RESP accounts that can be opened in a child’s name. This means you can still open an RESP for a grandchild, even if an aunt has already done so.
There are, however, limits on how much money can be contributed per child, across all the RESPs in that child’s name. The lifetime limit is $50,000. If you over-contribute, you (the subscriber), will be required to pay tax on the over-contribution amount until it is withdrawn from the RESP.
Learn more about RESPs and the roles played by subscribers, beneficiaries, primary caregivers, and providers.
What you need to open an RESP
You can open an RESP for a child, even if you’re not the child’s parent. You should still talk to the child’s parent or guardian before opening the account, as they will need to provide the child’s social insurance number. They will also need to consent to family income testing to determine eligibility for the Canada Learning Bond and Canada Education Savings Grant.
The person opening the RESP is called the subscriber. This person must:
- select a Registered Education Savings Plan and names an eligible beneficiary.
- provide a social insurance number and certify eligibility conditions have been met.
- request the Canada Education Savings Grant (basic and Additional), the Canada Learning Bond and/or provincial grants and complete the application forms.
- direct Educational Assistance Payments to an eligible beneficiary.
- inform the RESP provider of any change to a beneficiary’s status.
If the child doesn’t go to higher education
RESP accounts can stay open for up to 36 years. This means that even if the RESP beneficiary doesn’t go on to higher education directly after high school, you can wait to see if they change their mind.
If you are sure the money will not be used by the beneficiary in the future, you have other options to consider:
- Transfer the RESP to another child
- Transfer the RESP to an RRSP
- Close the RESP
If you decide to close the RESP, your own contributions are returned to you. You will have to pay taxes on the money that you earned as interest in your plan. You must also return any government grants that were contributed to the account.
Read more about your options for what to do with an RESP if the child doesn’t go on to higher education.