A Registered Education Savings Plan (RESP) is a government initiative to encourage saving for education. A Registered Education Savings Plan is a special savings plan that can help you, your family, or your friends save for education after high school. RESPs are registered by the Government of Canada to allow savings for education to grow tax-free until the person named in the RESP enrolls in education after high school. A parent, grandparent makes contributions on behalf of a child, who will eventually use the savings for post-secondary education.

An RESP is the Best Overall Choice
No other savings option provides as many advantages as an RESP. For example, if you were to save in your RRSP and then withdraw it to pay education costs, you’d have to pay income tax on the full amount you withdraw at your tax rate. With an RESP, the interest earnings are paid in the name of your child. Students have generally low income levels, so little or no tax is payable.

As well, all contributions you make to the plan over the years are returned to you, tax-free. It is the interest this money earns that goes to finance your child’s education. You can’t lose.

Also an RRSP is not eligible for the 20% grant. You’d be passing up extra money. A Registered Education Savings Plan (RESP), created by the Federal Government to help parents provide full education opportunities for their children, allows you to save up to $4,000 per year per child, to a lifetime total of $42,000 per child in a tax-sheltered plan.

Your savings will grow with the help of special plan features:
• The Amount of the CESG (Canada Education Savings Grant) is based on your family income. The amount can change over time as your family income changes.
• No matter what your net family income is, the grant provides at least 20 cents for every dollar on the first $2,000 of annual RESP savings made on behalf of a child.
• Depending on your family income, your child could receive additional grant on RESP savings that you make after 2004 on behalf of a child.
• If your net family income is below $35,595*, the grant will be 40 cents for every dollar on the first $500 you save in your child’s RESP each year.
• If your net family income is between $35,595* and $71,190*, the grant will be 30 cents for every dollar on the first $500 you save in your child’s RESP each year.
• Your net family income is reported on your Canada Child Tax Benefit statement (commonly known as “baby bonus”, or “family allowance”) that you receive from Canada Revenue Agency each July.

Advantages for opt RESP:
• Tax-sheltered education savings accounts that can help parents save for their children's education after high school
• Government incentives such as Canada Education Savings Grant (CESG) and Canada Learning Bond (CLB).
• Tax benefits through income split and tax-deferral.

*Canada Education Savings Grant (CESG):
To encourage parents to save for their child's post-secondary education, the government pays a basic CESG of 20% of annual contributions to a maximum CESG of $500 for each child. The government also pays an additional 10% or 20% on the first $500 contributed to a RESP for a child. The additional amount is based on the net family income of the child's primary caregiver.

*Canada Learning Bond (CLB):
The government also provides an additional incentive, the Canada Learning Bond (CLB), to help modest-income families contribute to an RESP. For families entitled to the National Child Benefits (NCB) supplement, the CLB will provide an initial $500 to children born on or after January 1, 2004 when an RESP account is opened. Thereafter the CLB will also pay an additional $100 annually for up to 15 years for each year the family is entitled to the NCB supplement for the child.
Government incentives and the tax benefits make an RESP an attractive vehicle for saving for a child's post-secondary education. RESP should be incorporated in the overall family tax planning strategy for betterment for your future.