The Ins and Outs of the Registered Education Saving Plan

Not sure where to start with investment options for your Canadian employees? While there are many different types of investment opportunities, this post will focus on the Registered Education Savings Plan (RESP).

What is an RESP?

The Registered Education Savings Plan (RESP) exists to help save money for post-secondary education – most commonly, this is a parent saving for their child’s future. An RESP account creates a savings vehicle where money can be invested and those investments will grow tax-free compound interest while in the account. While there is no annual limit on contributions into an RESP account (from the year 2007 onward), there is a lifetime contribution limit of $50,000 per beneficiary.

What can RESP funds be spent on?

Eligible expenses for RESP savings may include:

  • Tuition for trade schools, CEGEPs, colleges, universities, and apprenticeship programs
  • Books
  • Tools
  • Transportation
  • Rent

Who can open an RESP?

The following individuals can open an RESP account for a child:

  • Parents
  • Guardians
  • Grandparents
  • Relatives
  • Friends

RESPs, however, are not just limited to children – adults can also open one for themselves! If you are under the age of 21, you may also be able to receive the Canada Learning Bond (CLB).

What you need to know before opening an RESP account

To open an RESP, the beneficiary must be a Canadian resident and have a valid Social Insurance Number (SIN).

If you are opening an account that will only have one person named as the beneficiary, then an Individual RESP account is available. If you are opening the account for multiple children, or you anticipate having multiple children in the future, then a Family RESP account is available and allows you to name additional beneficiaries in the future.

You are able to contribute to an RESP for up to 31 years after the account was opened, and have until the end of the 35th year to use the funds (or up to 40 if you have specified plan) – which means there is time if a child (beneficiary) does not pursue further education immediately after high school.

When money is withdrawn from the RESP for post-secondary education, your own contributions will not be taxed, but, government grants and interest that accumulated inside the plan will be taxed at the student rate. However, since most students have little to no income, they can usually withdraw the money tax-free.

When opening an RESP, talk to your financial institution about how to apply for benefits like the Canada Learning Bond (CLB) and the Canada Education Savings Grant (CESG).

Additional Information

For more information on the Canada Education Savings Grant, visit the CRA website here:

For more information on how to manage an RESP, taxation, transferring RESP amounts to other registered accounts, and/or closing an RESP account, visit the CRA website here:

PEO Canada’s group plan offers multiple investment solutions, including Registered, Non-Registered, and Tax-Free Savings Accounts. For more information on the solutions we offer, visit our website here:

Are you a client of PEO Canada? Reach out to your Benefits Contact at any time to discuss investment plan options for your Canadian employees.

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