We all know that college and university tuition expenses are on the rise, and this account is designed to help make saving for these cost a little bit easier.
The term RESP stands for Registered Education Savings Plan.
Similar to an RRSP, money grows inside the account tax free. There is no deduction on deposits but the Federal government does offer some additional money to account holders in the form of the Canada Education Saving Grant (CESG, another acronym I know).
This “Grant” is equal to 20% of the first $2,500/year deposited by you into the account. That’s an extra $500/year up to a lifetime maximum of $7,200! Not too shabby. The money accumulates in the account and when the child is ready to start college or university the money is withdrawn and taxed in the hands of the student, which usually results in a lower tax bill then if the money was taken by his/her parents.
RESP accounts can be setup as an Individual Plan – where one child the be beneficiary or as a Family Plan – where two or more children share the pool of money in the account.
Now the next time you’re standing around the water cooler with your co-workers and someone brings up their RRSP, TFSA or RESP you can nod and smile knowing you know exactly what they’re talking about.
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