Years have passed, and Sarah now has a family of her own! With a young daughter to think about, she’s been hearing that opening a Registered Education Savings Plan (RESP) is a smart move, and she’s curious to learn more!

 

An RESP is a government-registered account created to help families save for a child’s post-secondary education. It offers valuable benefits like tax-free growth and government contributions, making it one of the most effective tools for future education planning.

 

When Sarah opens an RESP, she can contribute money over time, and any investment growth within the account isn’t taxed. While there’s no annual contribution limit, the lifetime maximum per child is $50,000. The real advantage comes from the Canada Education Savings Grant (CESG)—for every dollar Sarah contributes, the government adds 20%, up to $500 per year and a maximum of $7,200 per child. Families with lower incomes may also qualify for additional support through the Additional CESG or Canada Learning Bond, which can provide extra funds even without regular contributions.

 

 

Funds saved in an RESP can be used for a wide range of education-related costs, including tuition, books, housing, food, and transportation. Once her child enrolls in an eligible post-secondary program, they can begin receiving Educational Assistance Payments (EAPs). These are taxed in the student’s name, which often means little or no tax due to their lower income.

 

But what happens if her daughter decides not to pursue post-secondary education? Sarah still has flexible options. She can keep the RESP open for up to 35 years, transfer it to another child, or even roll the funds into her own RRSP if she has room. While any unused grant money must be returned to the government, her original contributions are always hers to take back!

 

 

This information is not investment advice and should be used only in conjunction with a discussion with your RBC Dominion Securities Inc. Investment Advisor. This will ensure that your own circumstances have been considered properly and that any action is taken based upon the latest available information.
The strategies and advice in this newsletter are provided for general guidance. Readers should consult their own Investment Advisor when planning to implement a strategy. Interest rates, market conditions, special offers, tax rulings, and other investment factors are subject to change.