A Registered Education Savings Plan (RESP) is a special plan that helps you save for a child’s studies after high school. Over the years, you put money into the plan and invest it so it will grow.

There are two main types of RESPs:

• RESPs you buy through a financial institution (including a bank, mutual fund company, brokerage firm, or trust company). These RESPs work a lot like any other investment account.
• Scholarship plan RESPs, which you buy from scholarship trust companies. With these plans, you are part of a larger group of families who are also saving for their children’s education. 

Comparing the costs and main conditions of the two types of RESPs
This chart compares the costs for RESPs from a financial institution to scholarship plans.

	RESP with financial institution (bank, financial company) Individual and Family plans	Scholarship plans Individual and family plans
Are there fees to open an account?	Usually No	Yes
Are there yearly fees?	Usually no	Yes
Are there direct costs when you buy investments?	Sometimes	No
Can I stop to pay regular payments?	Yes	No
Can I choose type of investments for my plan?	Yes	Usually No
Can I leave the Plan and withdraw accumulated funds without any additional charges?	Negotiable	No

 

RESP features:                 

• When you open an RESP, you name someone (beneficiary) who will use the money for their education. You can name a child, a grandchild, or any other family member. In some cases, you may be able to name yourself or a friend. The person you name must be a Canadian resident and have a Social Insurance Number.
• If you save for a child age 17 and under, the Government of Canada will also put money into the RESP as a grant. Getting a grant is like getting free money towards education. The grants stop at the end of the year when the child turns 17.
• Your savings in RESP grow tax-free. There is no tax on the money you make investing, as long as it stays in the plan.
• When your beneficiary is enrolled in an approved program of studies, he or she can start receiving money from the plan. What if this person doesn’t use the money in the plan? You may be able to name a backup beneficiary who will use the funds.
• If you have more than one person you want to save for, you can open a family plan. For family plans, your beneficiaries must be your children, adopted children, or grandchildren.
• You can choose how to invest your savings and grants, either on your own or with the help of an adviser.
• Your options include savings accounts, Guaranteed Investment Certificates, Canada Savings Bonds, mutual funds, stocks, and bonds.

 

Remember: Closing an RESP can be a costly step

Fees and taxes may have a big impact on how much money you get back. Make sure you understand all your options before you decide.

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