Registered Education Savings Plan, is a government-registered savings plan that helps families save for their children’s post-secondary education. A Child RESP is a type of RESP specifically designed for children.
As the cost of education continues to rise, having a savings plan in place for your child’s future education is essential. With a Child RESP, you can contribute to your child’s education savings while taking advantage of government grants and tax benefits.
How can Child RESP help you?
A Child RESP can help you save for your child’s post-secondary education by providing a tax-sheltered investment vehicle. Contributions to a Child RESP are not tax-deductible, but the investment growth is tax-free until it is withdrawn. Additionally, the government offers grants, such as the Canada Education Savings Grant (CESG), to help boost your savings. The CESG matches 20% of your annual contributions, up to a maximum of $500 per year.
Types of Child RESP
There are two types of Child RESP: individual plans and family plans.
Individual plans are designed for a single child, while family plans can be used to save for the education of multiple children. With a family plan, the funds can be transferred between siblings, giving you more flexibility in your savings.
Frequently Asked Question
Parents, grandparents, legal guardians, or any other adult with written permission from the child’s parents can open a Child RESP.
If your child decides not to pursue post-secondary education, you have several options for the funds in the RESP. You can transfer the funds to another child’s RESP, withdraw the contributions tax-free, or transfer the funds to an RRSP if you have contribution room.
While the funds in a Child RESP are intended for post-secondary education, you can withdraw the contributions tax-free at any time. However, any investment growth withdrawn will be subject to taxes and penalties.
If your child receives a scholarship, you can withdraw up to $5,000 of investment income from the RESP tax-free per year. However, any additional investment income withdrawn will be subject to taxes and penalties. You can also transfer the funds to another child’s RESP, as long as they are a sibling of the original beneficiary.