Registered Education Savings Plan: What it is, How it Works

A Registered Education Savings Plan (RESP) is a government-sponsored savings plan designed to help you save for your child's post-secondary education. RESPs offer a number of benefits, including:

* Tax-free growth on your contributions
* Government grants and bonds
* Flexibility in how you use the money

To open an RESP, you can go to any financial institution that offers them. You will need to provide your child's Social Insurance Number (SIN) and your own. You can contribute up to $50,000 per year, and the government will match your contributions up to 20%, to a maximum of $7,200 per year.

The money in your RESP grows tax-free until it is withdrawn. When you withdraw the money to pay for your child's education, it is taxed at your marginal tax rate.

You can withdraw money from your RESP at any time, but there are some restrictions. If you withdraw the money before your child turns 18, you will have to pay a 20% penalty on the earnings. You can also withdraw money to pay for qualified education expenses, such as tuition, books, and living expenses.

RESPs are a great way to save for your child's education. They offer a number of benefits, including tax-free growth, government grants and bonds, and flexibility in how you use the money. If you are thinking about saving for your child's education, an RESP is a great option to consider.

Here are some additional details about how RESPs work:

* You can contribute to an RESP until your child turns 17.
* The government will match your contributions up to 20%, to a maximum of $7,200 per year.
* The money in your RESP grows tax-free until it is withdrawn.
* You can withdraw money from your RESP at any time, but there are some restrictions.
* If you withdraw the money before your child turns 18, you will have to pay a 20% penalty on the earnings.
* You can withdraw money from your RESP to pay for qualified education expenses, such as tuition, books, and living expenses.

If you are not sure whether an RESP is right for you, it is a good idea to talk to a financial advisor. They can help you assess your financial situation and determine if an RESP is a good fit for your family.