What is an RESP?

Registered Education Savings Plan (RESP): A means by which an individual (the subscriber) can save money for one or more beneficiaries’ (future students’) post- secondary education. Benefits of an RESP
  • Tax- Deferred Investments: Earnings from an RESP are not taxed as long as they are left in the plan. At the time of withdrawal for education, the sum is taxed under the student, resulting in little or no tax.
  • Government Contributions: The government gives incentives to Canadians to start an RESP for their children (see below for more detail)
  • Flexibility: If the beneficiary does not pursue post secondary education, the money in the fund can be given to a new beneficiary, transferred into an RRSP (up to $50,000) or withdrawn.
  • Variety of Investments: The types of investments in a RESP can include cash, mutual funds, bonds, stocks, GICs, ETFs, etc.
Two Types of RESPs

Family Plan

Individual Plan

  • Can have one or more beneficiaries in the plan
  • Beneficiary is connected to the subscriber by blood or adoption
  • Contributions are allocated to each beneficiary
  • Beneficiaries must be under the age of 21 to be added to the plan
  • Contributions can be made until the beneficiary is 31 years old
  • Only one beneficiary is allowed
  • Beneficiary does not have to be related
  • There are no age restrictions
  • Contribution can be made up to 31 years after the plan is opened
Things to know about RESPs
  • When the beneficiary is in post- secondary, they can start taking payments, called Education Assistance Payment (EAP) from their RESP. EAPs are made up of both the investment earnings and government grants.
  • While the beneficiary is eligible to receive EAPs, the subscriber can take out withdrawals from the RESP without needing to make repayments, this is called a Post- Secondary Capital Withdrawal.
  • You can contribute a maximum of $50,000 per child
  • Contributions are not tax-deductible
Government Incentives
  • Canadian Education Savings Grant (CESG): Subscribers are allowed to contribute a maximum of $25,000 per year into the RESP. The government then pitches in 20% of that, up to a maximum of $2,500 each year. You are basically getting free money from the government just by putting your money in an RESP.
  • Additional Grant: Lower income families are subject to additional grants based on their net annual household income.

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