The RESP is one of the best ways for Canadians to save for a child’s education because of the Canada Education Savings Grant, the Canada Learning Bond and tax features of the account.

Four Primary Benefits of the RESP

1. Canada Education Savings Grant (CESG)

The CESG is an incentive to encourage Canadians to save for a child’s education. It contributes an additional 20% of the subscriber’s annual contribution to the RESP, up to $500 per year. The total grant available to any beneficiary between the ages of 0-17 is $7,200.

2. Canada Learning Bond (CLB)

The CLB is available to families who open a RESP and have a household income below a certain threshold .  The bond pays up to $2,000 to the RESP, without requiring the subscriber of the RESP to contribute.

3. Tax-free Growth

RESP subscriber contributions, CESG and CLB are all allowed to grow within the account tax-free, allowing growth to compound.

4. Taxable Under the Beneficiary

The CESG, CLB and all growth are taxable when withdrawn from the RESP under the beneficiary, not the subscriber. In most cases, beneficiaries will pay little to no tax since they are usually in a low tax bracket while enrolled in school.

The best time to start contributing to an individual or family RESP is the year the child is born, since this gives subscribers more time to earn the full grant.