A Registered Education Savings Plan, or RESP, is a great way to save up for your child's postsecondary education.
School's about to start? Whether you're the subscriber (the person who opens the account) or the beneficiary (the person who the money is for), find out how to get the most out of your RESP.
Funds can be withdrawn from the RESP when the beneficiary is about to start a program of study at a Canadian college, trade school, CEGEP or university, or select number of institutions abroad. Studies can be full- or part-time.
Make an appointment with a financial advisor to determine the best withdrawal strategy for your situation.
Be sure to bring proof that the beneficiary is enrolled in postsecondary studies, like a letter of registration, class schedule or tuition bill.
During the first 13 weeks of studies, the maximum amount a beneficiary can receive is $5,000 for full-time studies, or $2,500 for part-time studies. There is no limit after that.
The payments made from an RESP to the beneficiary are called Educational Assistance Payments (EAPs). These payments only draw on the funds from government grants and interest—not the contributions. The subscriber can decide whether or not to put the contributions towards the beneficiary's education.
EAPs are considered income that the beneficiary must declare. Depending on the length of studies, there are two approaches to get the most out of your RESP. If the beneficiary plans to be in school for several years, the withdrawals should be spread out to keep taxable income as low as possible.
For a short-term program of study, EAPs should be used as quickly as possible to pay for eligible educational expenses.
Does the beneficiary want to put off their education to travel or work? Your RESP is valid for 35 years from the time it's opened. The student can still use the money if they choose to go back to school.
Has the beneficiary started a program of study but decided to leave school part way through? They will receive EAPs up to six months after the end of enrolment without penalty.