A Registered Education Savings Plan (RESP), is a government-registered savings plan that helps you save for a child’s post-secondary education. And the federal government can add to your savings with education grants.

In addition to possible grants your savings grow tax-deferred until withdrawn. When the student withdraws the investment income and grants for educational purposes, the withdrawals are taxed in the student’s hands, typically at a lower rate.

We at Million Dollar Baby, offer RESPs through companies such as Industrial Alliance and Manulife.

How An RESP Works

  • A subscriber enters into an RESP contract with the promoter, & names beneficiaries under the plan.
  • The subscriber makes contributions to the RESP & Government grants (if applicable) will be paid to the RESP.
  • The promoter of the RESP administers all amounts paid into the RESP. As long as the income stays in the RESP, it is not taxable.
  • The promoter can return the subscriber’s contributions tax-free.
  • The promoter can make payments to the beneficiary to help finance his or her post-secondary education.
  • The promoter can make accumulated income payments.

Government Grants

The Canadian Government will contribute 20% of your annual contributions up to a maximum of $500 per year. Depending on your income you may also qualify for more grants.

If your child does not pursue post-secondary education, the RESP may be transferred to a sibling. If there’s not a sibling for the grants to be transferred to, then they must be returned back to the government. Your contributions and interest can either be rolled into your RRSP, or must be taken out as income by the 35th year.

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An RESP is a great way to save for your child’s education, but is limited to being used for education, whereas the Million Dollar Baby Plan has the flexibility to be used to finance anything major purchase in your child’s future!