What is a Registered Education Savings Plan
A registered education savings plan
(RESP) is a financial vehicle that is specially designed to build
up savings for a child’s postsecondary education. The amounts accumulated
in an RESP are intended to cover the tuition fees and all education-related
expenditures, such as housing, school supplies, food, transportation expenses,
As is the case with the registered retirement
savings plan (RRSP), the federal government permits the investment income
from an RESP to grow in a tax shelter as long as it is not withdrawn from
the plan. Clearly, the RESP is to education what the RRSP is to retirement.
In addition, to encourage parents to invest
in the postsecondary education of their children, the federal government
will provide a grant corresponding to 20% of the annual contributions paid into the plan,
up to a maximum of $500 per year, per beneficiary. The lifetime maximum
grant paid per beneficiary cannot exceed $7,200.