How does an RESP work?
Optimize Team
September 07, 2023
The Registered Education Savings Plan (RESP) is an account that can be used to save for the post-secondary education of children. The funds in this account can be contributed by parents, grandparents, relatives, friends, etc.
When opening an RESP, there are three different accounts to choose from: Family Plan, Individual Plan, and Group Plan.
As of 2007, the Canadian Government changed the guidelines dictating the contribution limits for an RESP account. Currently, there is no annual contribution limit that applies to an RESP account, with a $50,000 total contribution limit.
Those contributing to an RESP can boost their savings contributions by making use of the Canada Education Savings Grant (CESG). With this grant, the Canadian Government will match 20% on the first $2,500 contributed annually to an RESP (max. of $500 per beneficiary per year). The maximum lifetime limit per beneficiary is $7,200, up to the age of 18.
The Canada Learning Bond (CLB) is a $500 benefit provided to children of families with a modest income. The children of these families also qualify for CLB installments of $100 per year until age 15, as long as they continue to meet income thresholds. The total maximum CLB payable per child is $2,000.
If a child does not continue into post-secondary studies out of high school, you are able to wait for a while to see if they change their mind, as an RESP can stay open for up to 36 years. If the listed beneficiary of an RESP decides never to continue their education, there are a few options available.
To learn more about RESPs and other types of investment accounts, speak with one of our Licensed Optimize Representatives, or follow the link below to get your Complimentary Financial Plan.