What is an RESP? How Does It Work?

Due to the high cost of post-secondary education, many Canadian families enroll their children in a Registered Education Savings Plan (RESP). It is helpful to begin saving early so that they have a head start when it comes time to attend university, college, or a skills-training program. But what is an RESP? How does it work? The RESP is a long-term investment strategy designed to help family members and friends contribute to a child's education. Investing in this account is tax-free. You may even be eligible for government contributions, such as the Canada Education Savings Grant (CESG) and the Canada Learning Bond (CLB) - free money towards your child's education. A contribution to the RESP is made by the sponsor, usually the child's parent or guardian. The government contributes 20% of that amount, up to a maximum contribution of $2500 per year. If you contribute the maximum amount, you will receive $500 per year in free money. Known as the Canadian Education Savings Grant (CESG), this government grant is deposited direct