- An Education Savings Plan registered under the Federal
Income Tax Act.
- Allows savings and interest to compound tax free.
- Qualifies for a Canada Education Savings Grant that
provides a 20% top-up on the first $2000 deposited annually per child.
- All interest is paid to the student (your child) and is
taxed at their rate, which could attract little or no tax.
- Return of and/or rollover to an RRSP of the interest if
the nominee (your child) doesn't advance to post-secondary education under
certain conditions and circumstances.
- Tax free growth:
Interest compounds tax-free in the Plan.
- Income splitting:
Interest that would be attributed to a subscriber in a regular savings plan
is attributed to the nominee (the student) in an RESP.
Principal invested in fully insured or government guaranteed securities.
Saving plan and corresponding deposit schedule based on each individual's
- Greater growth:
20% top-up on the first $2000 deposited annually per child.
Most important over 85% of children with mature CST plans actually enroll in
post-secondary education, and of those 94% graduate.
TYPES OF RESPs
- Fully secured investments
- Form of forced savings
- Tontine principle can add to yield
- Limited investment knowledge required
- Sponsored by non-profit organization
- Can invest in non-secured investments
- No requirement to save regularly
- Needs more knowledge of investment in general and more
time to monitor investments
- Sponsored by for-profit organization
- Investment diversification
- Potential higher returns
- Potential of lower returns
- Complacency of investor
- Investors sometimes have no real idea in what they are
- Theories and predictions are not often questioned
- For profit
- Impact of MER
- Variety of Investments
- High Service Charges
- Informal Service
- New to the RESP market
- For profit
- No requirements to continue to save over the years