Featuring Sean Fahy, Bcomm, Financial Planner

Duration: 1 minute

A Registered Education Savings Plan or RESP is a program introduced by the government.

You save for your child’s education. When money is contributed to an RESP, there is no tax deduction but the funds are allowed compound tax inside the RESP for up to twenty-five years.

When money is withdrawn for what they call reasonable educational expenses, only the growth and grant are taxable. The original capital contributed is not taxable.

The main benefit of an RESP is a Canada Education Savings Grant by which the government contributes up to twenty percent the first twenty-five hundred dollars contributed per year or five hundred dollars. It is almost free money.

Contributions are accumulative and can be made to a maximum of fifty-thousand dollars per child over the course of the twenty-five years. Tax free compounding, income splitting and the government grant all combine to make this the best way to save for your child’s education.