A Registered Education Savings Plan, or RESP, is a special tax-advantaged investment plan that allows an account holder, or subscriber, to invest for the education of a beneficiary child. There are many benefits to an RESP including a government matching scheme and a versatile tax-advantaged investment opportunity, making them excellent investment choices for your child’s future.
An RESP allows a subscriber to take advantage of the Canada Education Savings Grant, or CESG, where the government matches deposits at a rate of 20% up to a benefit maximum of $500 per year and a lifetime benefit of up to $7,200 in free money. The tax-advantaged status of an RESP allows for subscriber deposited amounts to be withdrawn tax free and for government grants and investment income to be taxed at the income tax rate of the beneficiary student. Since students usually have low income and are often in the lowest income tax bracket, and have tuition and tax credits, there is often no tax paid at all.