A Registered Education Savings Plan (RESP) is an investment account geared towards saving for a child’s education. Like an RRSP and TFSA, an RESP allows investments inside the account to grow tax free, meaning no taxes on capital gains and no income taxes on interest and dividend payments. The big benefit with RESPs, though, is that the government pays you to save by kicking in a grant of up to $7,200 over the life of the plan.
The sponsor of the plan, usually the child’s parent or guardian, makes a contribution to the RESP. The government then contributes 20% of that, up to a maximum contribution of $2,500 each year. That’s $500 in free money every year if you contribute the maximum. Known as the Canadian Education Savings Grant (CESG) this government money goes straight into the beneficiary’s RESP and is yours to invest as you please.
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