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Start building a stronger education fund with a tax-advantaged RESP designed to help Canadian families save smarter. Benefit from government grants, tax-deferred investment growth, and flexible contribution options—so you can prepare confidently for your child’s postsecondary future.
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A Registered Education Savings Plan (RESP) is a government-registered, tax-advantaged savings account designed to help Canadians save for their children's or their own post-secondary education. One of the biggest advantages of an RESP is access to government grants that add to your contributions and accelerate your savings growth. In addition, the investments inside the RESP grow on a tax-deferred basis, meaning investment earnings are not taxed while they remain in the account. When funds are withdrawn for eligible education expenses, they are typically taxed in the student’s hands, who often has little to no income. Parents, grandparents, and even friends can contribute to an RESP, and those contributions have the opportunity to grow over time.
Registered Education Savings Accounts must be opened for subscribers through a licensed promoter (financial institution, credit union, certified financial planners, group plan dealer, or insurance company) such as Kinley Financial. Once an RESP Account has been created, you can contibute to your account as little or as much annually through your Financial Institution or Online with either lump sum payments or through regular Pre-Authorized Contributions (PACs). There is no limit to how many RESP accounts you can open for the beneficiary, therefore parents, grandparents and even children can all open RESP accounts.
While you can contribute any amount annually to an RESP account there is a lifetime maximum of $50,000 per beneficiary. Therefore, a contribution of $2,500 per year is recommended to maximize the 20% (up to $500 annually or $7,200 lifetime) match provided by CESG (Canada Education Savings Grant) unused CESG room can carry forward for future years. If multiple Registered Education Savings Plan (RESP) accounts for the same beneficiary exceed the $50,000 lifetime contribution limit, the subscriber(s) must pay a tax penalty of 1% per month on their share of the over-contribution. This penalty continues until the excess amount is withdrawn.
The contributions to an RESP account can always be returned to the original subscriber (the person who opened the plan) tax-free, and if you choose to close the plan you can receive an AIP (Accumulated Income Payment). If you withdraw contributions while no beneficiary is eligible for an EAP (Educational Assistance Payment), it may trigger a repayment of a portion of the CESG.
At any time the subscriber may choose to give these funds to the beneficiary for payment of post-secondary education. To take money out of the RESP to pay for education the beneficiary must enrol in full- or part-time studies at an eligible school (in Canada or abroad), programs must meet the minimum weeks of study and hours per week, and provide the RESP promoter with proof of enrolment. The subscriber asks the RESP promoter for an EAP (Educational Assistance Payment) and the beneficiary can use the EAP money to pay for expenses like tuition, books, tools, transportation, and rent.
Investment earnings within an RESP can grow without being taxed while they remain in the account. When funds are withdrawn for eligible post-secondary education expenses, they are generally taxed in the student’s name and often resulting in minimal or no tax due to their lower income level.
Accelerate your education savings with valuable government programs such as the Canada Education Savings Grant (CESG), the Canada Learning Bond (CLB), and other available incentives. These contributions can significantly enhance the long-term growth of your RESP.
RESP's are designed with flexibility in mind; you decide who is the beneficiary of the RESP account. If the original designated beneficiary decides not to pursue post-secondary education, you may have the option to name another eligible beneficiary. Additionally, you have up to 35 years to use the funds, providing both time and adaptability as plans evolve.
A Registered Education Savings Plan can be a strong option for parents, grandparents, or family members who want to save for a child’s post-secondary education in a tax-advantaged way. It is often best to open an RESP as early as possible, because the sooner contributions begin, the more time the savings and investment growth have to build, and the more opportunity there is to benefit from available government incentives and contribution matching.
An RESP can also be valuable for someone opening an account for themselves if they plan on pursuing post-secondary education in the future. In Canada, the beneficiary of an RESP can be a child or an adult, and an adult can open an RESP for themselves and be both the subscriber and beneficiary. This can make an RESP a useful option for someone planning to start or return to post-secondary education later in life and wanting to grow savings in a tax-advantaged account to cover future education costs.
Unlike an RRSP (Registered Retirement Savings Plan) which allows investments to be deducted from your taxable income for the year contributed an RESP uses the subscribers post-tax funds. Therefore an RESP cannot be used as a tax deduction for the year contributed. However, a subscriber can chooses anytime to withdrawl and return their contributions tax-free (because you already paid taxes on this money before contributing) but it may trigger a repayment of a portion of the Canada Education Savings Grant (CESG). If you choose to close the plan you can receive an Accumulated Income Payment (AIP) for the investment growth. AIPs are taxed at your regular income tax rate plus an additional 20% penalty (12% for residents of Quebec). However, you can avoid the 20% penalty and defer income tax if you transfer up to $50,000 of the growth to your Registered Retirement Savings Plan (RRSP) or a spousal RRSP, provided you have available contribution room.
To take money out of the RESP to pay for education of an eligable beneficiary you can withdraw the accumulated interest and government grants as an EAP. The EAP payments are taxed in the hands of the student (beneficiary). Since students often have low income and available tuition tax credits, they usually pay little to no tax on these amounts. EAP withdrawals are capped at $8,000 ($4,000 for part-time) during the first 13 weeks of school.
It's never too late to save for post-secondary education. Inquire about an RESP Account by speaking with one of our licensed Advisors. They'll help you find the best account that meets your educational and financial goals.
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Whatever your life’s goals, our financial professionals can help design a strategy tailored to your specific needs. Kinley Financial is primed to help you prepare for the long term with life insurance, education planning, and retirement strategies.
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