A Registered Education Savings Plan (RESP) provides Canadians with many benefits when saving towards a child’s education after high school. With the escalating costs of post-secondary education, it’s a wise choice to make early on to avoid having to accumulate large debt later on.

RESP Benefits.

The federal government will match 20% on each dollar you put into an RESP, up to an annual limit of $500, and a lifetime maximum of $7,200 per child through the Canada Education Savings Grant (CESG). All you have to do is open an RESP and make contributions and the government will add CESG funds. It’s like being paid to save!

Another benefit of an RESP is that the money and the earnings in the plan accumulate tax-free until the money is withdrawn to pay for your child’s post-secondary education (PSE). When the money is withdrawn, you get your contributions back tax free and the grant and income generated on the grant and your contributions are taxed in the hands of your student. If your child doesn’t end up going to PSE, then you get your contributions back tax free, the grants go back to the government and then if you qualify, you pay tax on the income generated on the grants and your contributions or transfer the income tax free into your RRSP.

RESP money can be used to pay for education-related costs once you've provided proof of enrollment in a qualifying program. Your child can use the funds they need to pay for books, rent, tuition, and school supplies. If your child requires a car to get to classes, you can even use the RESP money to pay for it, along with other related costs like insurance, gas, parking, tires, and so on.

Why you need an RESP now more than ever.

In today’s reality it’s important to save for your child’s education for 2 very important reasons:

1. The cost of higher education is increasing and you need to be prepared to avoid going into debt and your child incurring big student loans.

2. National and global job markets are more competitive than ever. A post-secondary education will help ensure your student gets their foot in the door, and lands with their feet on the ground.

RESPs are a good and necessary solution that you can start now to be prepared for the high costs of education in the future.