An RESP is a tax-free investment account that helps parents and families save for a child's post-secondary education.

What type of investment is RESP?

A Registered Education Savings Plan (RESP) is a registered investment account that lets you save for your child or grandchild's post-secondary education and take advantage of government grants to help build savings even faster.

Is RESP a source of income?

A Registered Education Savings Plan (RESP) is a college plan sponsored by the Canadian government. Subscribers to an RESP make contributions that build up tax-free earnings for paying for higher education.

Is an RESP a mutual fund?

Within an RESP you have the choice of holding a variety of investment types including mutual funds. With our Fund Partner^™ plan, you can gain the benefits of mutual funds to grow the funds within the plan. Mutual funds can be an important part of an overall investment plan, offering diversification and risk management.

Is an RESP a savings account?

A Registered Education Savings Plan (RESP) is a special savings account for parents who want to save for their child's education after high school.

RESP Explained Part 1 | Tax Free Investing for Your Child's Education | Canadian Tax Guide Chapter 5

Can I invest my RESP in stocks?

Your RESP isn't limited to one particular asset class. Everything from cash and mutual funds to GICs, stocks, bonds and ETFs can be used to build up your RESP.

How much interest does an RESP earn?

RESP contributions are tax free and generate an immediate 20% return on investments, thanks to the Canadian Education Savings Grant (CESG).

Which is better TFSA or RESP?

An RESP is specific to savings for post-secondary education, while a TFSA is for general savings, which can goes towards school, buying a home or a trip around the world. ... “Besides, the investment income generated in the RESP is sheltered from tax anyway so there isn't an advantage to a TFSA.

What happens to RESP money if not used?

The money that was contributed to the RESP over the lifetime of the plan may be withdrawn and returned to the subscriber. Contributions withdrawn are not subject to any additional tax. The subscriber can also elect to receive the income earned in the form of an Accumulated Income Payment (AIP).

Does the government match RESP contributions?

Under the CESG, the government matches 20% on the first $2,500 contributed annually to an RESP, to a maximum of $500 per beneficiary per year. The lifetime maximum per beneficiary is $7,200, up to age 18.

Do you report RESP on taxes?

You will not be taxed on the amount you contributed to the RESP, but you will have to pay taxes on the money that you earned in your plan as interest. This money is called "accumulated income." It will be taxed at your regular income tax level, plus an additional 20 percent.

Can I use my RESP to buy a house?

RESPs are not the only way to invest for future education. There's no question it is one of the most attractive options given the Canada Education Savings Grant (CESG) from the government. ... The money can be used to start a business, buy a house, used for travel after school or for education.

Can RESP be used for rent?

So if your child needs a car to get to classes, you can use RESP money to pay for it, along with insurance, gas, parking and maintenance. Other eligible expenses may include rent, meals, living expenses, a laptop or tablet, a desk and student fees.

Who owns the RESP?

Understanding RESPs

The plan is usually an arrangement between one subscriber (or two, if they are spouses) and a promoter (such as a bank or other organization). The arrangement is usually backed by the government and plays out this way.

Do dividends count as RESP contributions?

Just be aware that if you go this route, not only will you have to pay back all government grant money, but you will also have to pay tax on capital gains, as well as any interest and dividend payments (the non-contribution portion of the RESP).

Can RESP be self directed?

A self-directed RESP is one where you do all the work. In other words, you're the one clicking “buy” and “sell” on your stocks and bonds within your RESP account. But unlike a selfie, where you simply click a button, self-directed RESPs require serious know-how and financial savvy.

Can you lose money in RESP?

As a result, parents lose a chunk of their money right out of the gate. What's more, the rules on contributions and withdrawals are complex and restrictive, and there are stiff penalties for leaving the plan early. In extreme cases, parents have lost all of their RESP savings.

Is RESP a good idea?

So while RRSPs are great for retirement, when you know you'll be in a lower tax bracket, and TFSAs are great for savings goals, since the money you withdraw isn't subjected to taxes, RESPs are great resources for young people starting off in their education and their financial journey.

Can I use RESP to pay off OSAP?

The short answer is yes. This is the withdrawal of any remaining investment earnings by the person who started the RESP if the plan qualifies. ... It can be withdrawn as cash less a tax penalty or transferred tax free to an RRSP provided there is contribution room.

What are the disadvantages of an RESP?

The biggest disadvantage of an RESP is that any earnings that are withdrawn but not used for post-secondary education incur a twenty percent penalty, and income taxes must be paid on the money.

Should I max out my RESP?

1. Maximize grants without over-contributing. ... For most people there isn't much point in contributing more money than is necessary to max out the grants. Without the sweetener of RESP grants, you're generally better off doing something else with the money if you have any debts, or unused TFSA or RRSP contribution room.

Is RESP tax sheltered?

To start, the RESP is a tax-sheltered savings tool. That means that while the money is in the RESP, you don't have to pay any taxes on the government grants and investment earnings. ... Remember that their income has to be above a cut off level to be taxed, and students often don't make more than the cut off.

How much should I invest in RESP?

Contributing to Your RESP

To get the most money from the government, we recommend you contribute $2,500 a year for 14 years and then an extra $1,000 in the 15th year. This way, you'll get the maximum basic Canada Education Savings Grant from the government—a whopping $7,200—plus any other grants you qualify for.

How do I get money out of my RESP?

In order to withdraw money from their RESP, the subscriber needs the beneficiary (student) to provide proof of enrollment confirming the beneficiary is enrolled as a full-time or part-time student in a post-secondary program or institution.

Can you day trade in RESP?

Can you day trade in an RESP? You can day trade in a registered education savings plan (RESP), but not efficiently. The primary value in an RESP is to earn grant money for the beneficiary to attend school. ... What's more, the plan's beneficiary has to pay income tax when they withdraw the money.