Registered Education Savings Plan

By Maurício Dreher


The average university student pays a lot of money per year for the post-secondary education in Canada. And if the student is going on for professional training such as medicine or law, those amounts can skyrocket.

A Registered Education Savings Plan (RESP) is a plan that can help the student to finance the education, which is somewhat similar to an RRSP because it is registered with the Canada Revenue Agency, and makes tax deferral and income-splitting possible. Contributions grow tax-free until the person named as beneficiary in the plan enrols in post-secondary studies. However, unlike an RRSP, the contributions to the plan are not tax deductible.

There has been no limit on how much can be contributed annually, as long as the lifetime limit of $50,000 is not exceeded.

What happens if the beneficiary does not attend a post-secondary institution?

• The money can be transferred to a sibling’s RESP
• The money can be transferred to the contributor’s RRSP, or to his or her spouse’s
• The money contributed can also be withdrawn at any time before the recipient proceeds to post-secondary education or if they decide not to proceed

The government helps the money in an RESP grow.

It will add money to the RESP through savings incentives that are available only to those with RESPs:

Canada Education Savings Grant (CESG)

• The Basic CESG is an annual payment of 20% (to a maximum amount of $500) on RESP contributions made in respect of an eligible beneficiary, up until the end of the year in which the beneficiary turns 17. But the maximum lifetime contribution of CESG to a plan is $7,200 per child.

• Additional CESG is income-based and the rate of 10% or 20% is paid only on the first $500 (or less) of annual contributions.

Canada Learning Bond (CLB)

It was introduced by the government in 2004 to provide an education savings incentive for children from families of modest income and for children in care.

The Employment and Social Development Canada (ESDC) provides an additional incentive of up to $2,000 to help modest-income families start saving early for their child’s education after high school (post-secondary education).

The Canada Learning Bond (CLB) will provide an initial $500 to children in modest income families, born on or after January 1, 2004. To help cover the cost of opening an RESP for the child, Employment and Social Development Canada (ESDC) will pay an extra $25 with the first $500 bond. The Canada Learning Bond (CLB) also includes an additional payment of $100 for each previous and subsequent year of eligibility, up to 15 years for a maximum of $2,000.

Children who are in care of a public primary caregiver of whom a special allowance under the Children’s Special Allowance Act is paid, are also entitled to the CLB.

A good idea would be to take the Child Benefit that a child may receive from the government, and invest it into an RESP, where the child has the chance to receive extra grants from the government, such as the CESG and the CLB. This way most of the funding for the child post-secondary education will come from the government and not from your pocket…

Source: CRA – Canada Revenue Agency –

Maurício Dreher

Maurício has more than 15 years experience in the financial industry, having an internationally recognized certification as Certified Financial Planner. He works with Canfin Financial Group, offering Investments, Insurances, Mortgages, with emphasis in Tax Savings Strategies. Bus: (877) 422-6346 ext. 528 or Cell: (416) 876-3644.

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