RESP: how does it actually work?
Save for your child’s post-secondary education and make your contributions grow with attractive government grants. Find out how RESPs work and how to make the most of them.
RESPs: saving made easy
Here’s how RESPs work in five easy steps, from account opening to making education withdrawals.
- Open an RESP: a Registered Education Savings Plan can be opened online or with an advisor.
- Contribute to an RESP: contributions are made at your own pace.
- Receive grants: governments boost your savings.
- Make a withdrawal for studies: the beneficiary receives education assistance payments (EAPs).
- Recover capital: contributions are returned tax-free to the subscriber.
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What is a Registered Education Savings Plan (RESP)?
The Registered Education Savings Plan is a simple and advantageous way to save for a child’s post-secondary education. In addition to tax-sheltered growth, your contributions are enhanced by government grants of up to $12,800.1
This means that your savings can work harder for you, without any extra effort on your part.
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What does an RESP account consist of?
An RESP is divided into three parts:
- Contributions made by the subscriber (the person who opened the RESP).
- Generous government grants that enhance the contributions.
- Income that accumulates over time.
The ratios used in the illustration are not representative of reality and are for information purposes only.
How the RESP works in 5 easy steps
How does the RESP work? It couldn’t be easier! Follow the steps and build your child’s future today.
1. Opening the RESP: the first step to peace of mind
To open an RESP, you will need to have your social insurance number (SIN) and that of the child, who must also reside in Canada. Parents, grandparents, relatives or friends: any eligible adult can do it, even if they are not related to the child.
Want to get started? Choosing the right provider is a key step. With Kaleido, open your RESP online in just 15 minutes or talk to our education savings advisors to find the right solution for your family. All with no sales charges.
2. Contributing to an RESP: a habit that pays off
Now it’s time to define your savings strategy. Your family budget, investment horizon and savings goal willdetermine the amount of your contributions —but remember that your ability to save may change over time. With the flexibility of our individual IDEO+ RESPs, you can adjust your payments according to your reality.
Whether you opt for small amounts each month, a larger payment when you get your tax refund or one-time additions, every dollar you save will bring you closer to your goal.
3. Government grants: your savings accelerator
And the best part? Your child could then receive up to $12,8001 in government grants to finance their education, thanks to the following programs:
- Canada Education Savings Grant (CESG);
- Quebec Education Savings Incentive (QESI);
- Canada Learning Bond (CLB).
When you contribute, the federal government and the Quebec provincial government add a contribution ranging from 30% to 60%2 directly into your RESP. All you have to do is watch your savings grow even faster through the leverage effect.
4. Paying education costs: how to make withdrawals from an RESP?
Is your child about to graduate from high school? This is a good time to start planning their RESP withdrawals! The government grants and the income accumulated over the years will combine to form their Education Assistance Payments (EAP). This money will be paid to the student to finance their post-secondary education.
How do withdrawals of educational assistance payments work? It’s simple: just follow these steps:
- Plan your withdrawals wisely.
- Apply online or contact our team.
- Provide proof of enrolment in an eligible educational program.
The funds will then be deposited into your or your beneficiary’s account.
5. Withdrawing your contributions: you get to choose your next move
And what happens to your contributions? They belong to you, and you can get them back tax-free. It is useful to keep them in the RESP during your child’s post-secondary education so that your savings continue to generate income.
In all cases, you are free to give them to your beneficiary, reinvest them for retirement or use them for any other personal project.
Frequently asked questions about how RESPs work.
Do you still have questions about how RESPs work? Here are some simple answers to help you see things more clearly.
Education Assistance Payments (EAPs) can be used to cover a variety of education-related expenses, including:
- tuition fees;
- school supplies;
- transportation costs;
- living expenses, such as housing, food and other running expenses.
With our individual IDEO+ RESPs, you choose the amount of your contributions (minimum $10) and their frequency. You can even manage your monthly contributions or make one-time contributions online, directly from your Client Space.
Anyone 18 years of age or older who has an SIN and resides in Canada can open an RESP for one or more beneficiaries. Whether you want to invest in the future of your children, your grandchildren or a loved one, Kaleido offers you savings solutions tailored to your reality, so you can grow your savings with confidence.
Once you’ve opened your RESP, Kaleido will apply for the grants on your behalf! If you haven’t already done so, simply make sure you send us your social insurance number and that of your beneficiary by going to your Client Space. This is a requirement for receiving the grants to which your child is entitled and for keeping your RESP in force.
Unfortunately, no. Under the Income Tax Act (Canada), the child must reside in Canada at the time the RESP is opened, as well as at the time contributions are made.
You will be able to reclaim your contributions tax-free in that case. As for grants and returns, you will have the following options, under certain conditions:
- Transfer the RESP to their sibling.
- Transfer accumulated income to an RRSP.
- Collect accumulated income in the form of accumulated income payments.
Learn more in our article “My child is leaving school: what should I do with their RESP?”
1. The lifetime limit is set at $7,200 per child for the Canada Education Savings Grant (CESG), and at $3,600 for the Quebec Education Savings Incentive (QESI). Canada Learning Bond (CLB) of up to $2,000 per beneficiary, for children born after December 31, 2003, from families who meet the financial criteria. Certain conditions apply. Refer to the prospectus at Kaleido.ca.
2. Canada Education Savings Grant (CESG) of 20% to 40%, and Quebec Education Savings Incentive (QESI) of 10% to 20%, based on adjusted family net income. Certain conditions apply. Refer to the prospectus at Kaleido.ca.