"RESP" stands for Registered Education Savings Plan. This is an account registered with the federal government to help you save for a child's post-secondary education. The person who opens the plan is the subscriber — usually, but not always, the parent. The person who will receive money under the plan is the beneficiary — usually, but not always, your child.
You can open an RESP as soon as the child is born. The money in the plan grows tax-free and the government offers special savings incentives. When the child enters a qualified educational program at the post-secondary level, he or she can start drawing on the accumulated savings. Only the child will pay taxes on the money he or she withdraws. Since many students have little or no other income, they usually don't have to pay much, if any, tax when they withdraw money from their plan.
You can open an RESP at almost any financial institution — including a bank, trust company or credit union — or an investment or scholarship plan dealer.
Before you open the RESP, you and the beneficiary both need to have a Social Insurance Number.
You can choose from three types of plans:
For a single beneficiary, who does not have to be a blood relative of the subscriber (the person who opens the plan).
For multiple beneficiaries, all of whom must be connected by blood or adoption to the subscriber. A government grant paid into an RESP may be shared among all the beneficiaries. If one beneficiary decides not to continue studies after high school, the other beneficiaries can still use the money.
Your savings are pooled with those of other people. The money your child receives is based on the amount of money in the pool and the total number of students of the same age who are in school that year. Usually you have to sign a contract agreeing to make regular contributions to the plan over a set period. Group plans are offered and administered by scholarship or group plan dealers. They may be more expensive than individual or family plans, depending on your investment choices.
Here are some of the questions you should ask before you open an RESP.
For more information about the Canada Education Savings Grant or the Canada Learning Bond, contact the Canada Education Savings Program of Human Resources and Social Development Canada toll-free at 1-800-O-CANADA (1-800-622-6232), or visit the CanLearn Web site.
For more information about taxes and RESPs, call the Canada Revenue Agency (CRA) toll-free at 1-800-959-8281 or visit the CRA's Web site.
If you have a problem with your RESP plan provider, see FCAC's FAQ "I have a problem with my Registered Education Savings Plan provider. Who can help me?"