What are the benefits of RESP Account Canada?

Short Answer

There are various benefits of contributing into a RESP. These include tax advantage, receiving of government grant, available investment options etc.

Detailed Answer

What is RESP Canada?

There is an increase in applying for student loans in Canada and loans generally incur high interest rates. RESP is registered with the federal government of Canada and is one of the best options to save up for and fund for post-secondary education of Canadian citizens.

The parents or any other contributor can open a RESP for the beneficiary and can start contributing for the beneficiary’s education until he or she turns age 31.

Benefits of RESP Canada

Let us explore the benefits of Registered Educational Savings Plan (RESP), Canada.

1. Tax-Advantageous Vehicle

The income returns, capital gains, dividends, interest received within RESP is not taxable. As long as the funds are within the RESP the money is not taxable. When a beneficiary takes money out for secondary education, the funds are taxed, however, students are generally under low tax brackets and will not be charged a huge tax liability.

2.Qualified Investments

Within a RESP, you can invest in shares, bonds, Exchange Traded Funds (ETFs), mutual funds, Guaranteed Investment Certificate etc.,


Anyone can contribute to an individual RESP. They can be blood related like parents, aunts, uncles or grandparents or they can be strangers, friends, or neighbors.

3. The Canada Education Savings Grant (CESG)

The government contributes 20% of your contribution into your RESP capped at $500 per year and $7,200 in lifetime.

Canada Learning bond

If a RESP beneficiary is from a family that has low-income earnings, born after 1at January 2004, and is a resident of Canada with a valid Social Insurance Number (SIN), the beneficiary becomes eligible for Canada Learning Bond grant. The beneficiary gets $500 in the first year and is assessed every year thereon, and receives $100 in every qualifying year with a maximum cap of $2,000.

RESP Canada Pros and Cons

Every savings plan that is tax advantageous has its own rules. If the beneficiary decides not to use the funds for educational purposes, then the funds incur tax plus 20% penalty. In addition, all the grants received over the lifetime the RESP was open, must be returned to the government.

Tagged With: registered education savings planresp canadaresp pros and consbenefits of resp canada
Categories: RESP
Ask Your Query for FREE, Get quick answers from our FINTRAKK community!
Discussion (0)
Related FAQs
What are the best Wealthsimple alternatives in Canada?

There are various online brokerage platforms in Canada. We believe that Questrade, Scotia iTrade and CIBC investor's edge are the best alternatives to Wealthsimple.

Is TFSA Canada a good idea?

Yes, opening a Tax Free Savings Account or TFSA surely seems to be a good idea. In fact, TFSA is good for a person who is 18 years or above and is looking for long term investment.

What is a RESP account in Canada and how does it work?

Registered Educational Savings Plan is a tax advantageous investment plan registered with federal government of Canada. This is used to accumulate funds for higher education.

Is Virtual Brokers good?

Like every other trading platform Virtual Brokers has its pros and cons. Read more to find out if the platform suits you. See if Virtual Brokers is good.

Which is the best bank for RRSP?

Based on our analysis of interest rate, fees charges, ease of managing the account and safety of funds, EQ bank is the best option in Canada to open a RRSP account.

Can you trade options on Wealthsimple?

Yes, now you can trade options through the Wealthsimple platform. Options trading is only available on the latest version of the Wealthsimple mobile app in your DIY accounts. You'll be able to buy or sell options in any of your self-directed trading accounts through the Wealthsimple mobile app. The best part is, there is no minimum account balance required.

Is it better to put money in RRSP or TFSA?

Choosing between TFSA and RRSP depends on various factors such as your goals, time frame of investment, your marginal tax rate, age etc. Discover the similarities and differences between TFSA vs. RRSP Canada.

Can a Non-Resident Open an Investment Account in Canada?

No, you cannot open an investment account in Canada while you are a Non-resident, the exemption being - Tax-Free Savings Account (TFSA). Having said that, you can continue to hold the investment accounts that you once opened while you lived in Canada.

Is Virtual Brokers safe?

Yes, Virtual Brokers is a safe online trading platform. Let's analyze the safety and security features that make the Virtual Brokers a popular platform.

Can a Non-Resident Open a Brokerage Account in Canada?

At present, the potential to open a brokerage account in Canada, while being a non-resident is complicated and has numerous terms and conditions. This varies from broker to broker. To become savvy in this topic, continue reading.