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RESP stands for Registered Education Savings Plans and people usually get confused between RESP and CESG. CESG is the Canada Education Savings Grant which is offered by the government of Canada.

What are RESP and CESG all about?

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RESP is a plan in which you can start saving for your child’s higher education by opening an account with Heritage Education Funds Inc. For every dollar you put in RESP, the government will provide 30% grant (with max $500 per child per year). That is CESG – one of the grants which make the investment in RESP profitable, among the others.

Things to Know about RESP

RESP account holders get good exposure to a number of government grants like CESG, CLB, BCTESG. CESG top-up is also an additional government grant from where the family gets eligible for extra $100 every year.

Canada Learning Bond (CLB) enables your chile to earn extra money. $500 for the first month and $100 every month up to 15 years of age. Without any kind of contribution.

The British Columbia Training and Education Savings Grant (BCTESG) is also offered by the government of British Columbia as a contribution of $1200 to children born in or after 2007.

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In Canada, a full-time RESP program has a minimum accessibility period of three weeks. Also, at least 10 hours per week.

The usage of RESP funds: Tuition fees, school and university books, and related expenses.

There are two types of withdrawable funds in RESP:

  1. Contribution – Withdrawl: You can withdraw all the contribution you made in the funds. This will be tax-free.
  2. Earnings – Withdrawl: The interest generated by your contribution, and the government funds earned by your RESP programs. These will be taxable withdrawals.

This is interesting to note that you will not be taxed for the contributions you make in the plans. Not while depositing and not while withdrawing. However, the income generated by this contribution of yours will be tax deductible in nature. Also, the grants earned by the RESP program will also be tax deductible when you will withdraw the funds.

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In order to open an RESP account, you can get in touch with Heritage Education Funds Inc.  They will help you in setting up RESP account for each of your children. You can start contributing whenever you want and the number of deposits can vary monthly too.

With an RESP account, the contributors(father, mother, grandparents, uncles, well-wishers) can contribute up to $50,000 for their kid’s education. This is a huge amount and sounds sweet when the entire amount is tax-free.

Keep in mind this one thing. If your kid decides not to pursue higher education then the government grants will be gone back to the government and any kind of income earned through RESP account would no longer be accessible. You will get your contribution back for sure.

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