A registered education savings plan (RESP) is a financial vehicle that is specially designed to build up savings for a child’s postsecondary education. The amounts accumulated in an RESP are intended to cover the tuition fees and all education-related expenditures, such as housing, school supplies, food, transportation expenses, etc.
As is the case with the registered retirement savings plan (RRSP), the federal government permits the investment income from an RESP to grow in a tax shelter as long as it is not withdrawn from the plan. Clearly, the RESP is to education what the RRSP is to retirement.
In addition, to encourage parents to invest in the postsecondary education of their children, the federal government will provide a grant corresponding to 20% of the annual contributions paid into the plan, up to a maximum of $500 per year, per beneficiary. The lifetime maximum grant paid per beneficiary cannot exceed $7,200.