Registered Education Savings Family Plan: What it Entails?

In this day and age, being able to afford a college education is no joke. Families are more and more feeling the strain of rising costs of tuition, and more and more youngsters are giving up on their dreams due to a lack of options. However, there is a simple solution to this problem – Registered Education Saving Plan (RESP) offers people the ability to follow their dreams without having to burden themselves with unpayable loans.

Here are some of the benefits of this plan:

Easy Availability

RESP is available to all citizens of Canada with the help of Heritage Education Funds. Parents or benefactors may create an account under this plan in order to help a child achieve the post-secondary education they desire, without it being a burden on them.

Tax Deferral

RESP accounts are tax-deferred. This means that the subscriber does not pay taxes on the earnings of a RESP account themselves. Instead, it is referred to the student who must pay it at the time of withdrawal of funds, whenever that may be. However, since students will, at best, be earning a minimal wage, they will generally be in low to zero tax bracket, thus essentially having to pay little to no taxes on the entire earnings.

Government Grants

One of the most attractive features of the RESP scheme is the grants you are entitled to receive when you contribute to this account. Under the Canada Education Savings Grant (CESG), the government gives out 20% of your early contributions, up to a maximum of $500 (or$1,000 in case previous years had not used up the maximum limit). The total limit allowable per child is $7,200.

Thus, if someone contributes $2,500 per year, they get the maximum $500 grant allowable. Continuing this for 14 years, the benefactor can accumulate $35,000 and receive $7,000 in the grant. The following year, they only need contribute $1,000 to hit the cap-limit on grants. Assuming a 3% rate of return, by the time the child turns 18, this money will have turned into $61,000, almost double the amount contributed. Thus, the key is to start contributing as soon as the child is born.

Multiple Plans

Another benefit of RESP is the different kinds of plans available that make it easier to set up for each circumstance. A person may set up an account for only one child or for more than one. In all cases, the benefactor must relate to all of them. The benefactor has control over the funds and may choose how to allocate it. Furthermore, if one child chooses not to pursue a higher education, the rest may use his share of funds for their own schooling.


RESP plans are incredibly flexible. Subscribers may choose a plan for a child, but if said child does not wish to pursue any post-secondary schooling, it is easy enough to transfer the funds to someone who is willing. As already stated, family plans allow other beneficiaries to use such funds.

On the other hand, in case someone wishes to pursue education later in life, they may also do that. Accounts remain valid for up to 35 years, and if the funds haven’t been transferred to someone else, they may use at any stage of life.

Benefactors may be anyone related to the child, not just parents, or even third party members. Thus, a lot of options are available, it is up to the individual to choose the right one