RESP FUNDAMENTALS
SAVING FOR A POST SECONDARY EDUCATION HAS BECOME AN IMPORTANT FINANCIAL OBJECTIVE FOR MANY CANADIANS.
We are all aware of the increasing costs of post secondary education as well as the necessity of a post secondary education in today's world. With all the cut backs in government funding combined with ever increasing tuition costs, saving for a child's education has become progressively more difficult. Anyone hoping to meet the costs of tomorrow's education will have to start saving today. A Registered Education Savings Plan (RESP) is an income tax deferred program designed for this purpose.
 WHETHER YOU SAVE A LITTLE OR A LOT, THE IMPORTANT THING IS TO START AS SOON AS POSSIBLE.
Contributions to an RESP are not tax deductible for the subscriber, however no tax is paid on any of the gains within the plan until the beneficiary (the student) starts to receive Education Assistance Payments from it. And then, the tax is based on their tax bracket.
Because of this sheltered feature, the plan can grow much faster than it would if the tax bill on the growth became due every year. An RESP can be set up for as low as $30.00 per month, or for a maximum of $4,000 per year per beneficiary, and can be set up as either individual or family plans.
 THE GOVERNMENT OF CANADA WILL HELP OUR CHILDREN RECEIVE THE EDUCATION THEY NEED WITH THE CANADA EDUCATION SAVINGS GRANT (CESG).
In February 1998 the Federal Government introduced the Canada Education Savings Grant. This grant is 20% of the amount contributed to an RESP to a maximum of $400 per year, per beneficiary. Combined with your contributions, this grant goes a long way towards accelerating the growth of the plan. Every Canadian child qualifies for the CESG.
RESP SAVINGS CAN BE USED AT ANY RECOGNIZED POST-SECONDARY EDUCATION FACILITY.
 Payments to a student from an RESP are applied to costs associated with the beneficiary's education such as tuition, textbooks, lab fees, transportation fees, housing, etc.
Contributions to an RESP are limited to a maximum of $4,000 per beneficiary per year and may only be made for the first 21 years of the plan or until the plan reaches a lifetime maximum of $42,000 per beneficiary. The RESP itself matures in 25 years.
WHAT HAPPENS IF THE BENEFICIARY DOES NOT GO ON TO POST SECONDARY EDUCATION?
Should the beneficiary not attend a recognized post secondary institution, all contributions within the plan are payable back to the subscriber. Growth within the plan can be withdrawn, subject to the deferred tax coming due, or it can be rolled into the subscriber's RRSP. Any CESG money must, of course, be paid back to the HRDC.
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SUMMARY OF ADVANTAGES:
