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What is an RESP?

by Maxine
Posted August 1 2010 12:17am
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An RESP (Registered Education Saving Plan) is a registered savings account with the Government of Canada that allows parents to save money for their child’s education after high school. The interest on the money is not taxed until it is taken out of the account, (unless you contribute more than $50,000).  When the RESP funds are withdrawn to pay for tuition, the money is taxed to the student and not to the parent. Since most students have little or no income they will likely pay little to no taxes on this money.

If your child decides not to continue his or her education past high school, the money in an RESP can be transferred to another beneficiary (a younger child, for example) or, in some cases, it can be transferred into your Registered Retirement Savings Plan. The funds can also be withdrawn, but taxes will have to be paid on the accumulated interest. Any government grants you have received on the money will be returned to the government.

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