RESP stands for Registered Education Savings Plan. It is a tax-advantaged investment account designed to help parents and guardians save for their child's post-secondary education. The RESP is available to residents of Canada, and it offers a variety of benefits and incentives.
The primary purpose of an RESP is to provide savings for a child's education. Contributions made to the plan are not tax-deductible, but they can grow tax-free until withdrawn to fund educational expenses. The government of Canada also provides additional financial support in the form of the Canada Education Savings Grant (CESG) and the Canada Learning Bond (CLB). These grants are intended to supplement the savings and help parents maximize their education savings.
RESPs can be opened by parents, grandparents, or any other individuals interested in saving for a child's education. The funds in the plan can be invested in a wide range of options, such as bonds, stocks, mutual funds, and guaranteed investment certificates (GICs). It is important to note that there are contribution limits and eligibility rules to qualify for the grants and incentives.
When a child enrolls in an eligible post-secondary program, the funds in the RESP can be used to pay for tuition, books, accommodation, and other related expenses. The accumulated income and grants are taxed in the hands of the student, usually at a lower rate than if they were considered part of their regular income.
In summary, an RESP is a government-sponsored savings plan in Canada that helps individuals save for the post-secondary education of a child. It offers tax advantages, government grants, and investment options to grow and preserve savings for educational purposes.
