Registered Education Savings Plan - RESP

AAA

DEFINITION of 'Registered Education Savings Plan - RESP'

A savings plan sponsored by the Canadian government that encourages investing in a child's future post-secondary education. Subscribers to an RESP make contributions that build up tax-free earnings - tax-free because subscribers cannot deduct payments made to the plan from their income. The government contributes a certain amount to plans for children under 18 under the Canada Education Savings Grant (CESG).

INVESTOPEDIA EXPLAINS 'Registered Education Savings Plan - RESP'

Payments are made by a contributor (parent) on behalf of a beneficiary (child). Once the child is in a post-secondary institution, he or she will receive educational assistance payments (EAPs). These EAPs count as income for the child (beneficiary). If the beneficiary doesn't receive payments - either by choice of the contributor or because the beneficiary does not attend a post-secondary institution, the contributor will receive the amount in the RESP back tax-free.

RELATED TERMS
  1. Nest Egg

    A substantial sum of money that has been saved or invested for ...
  2. Income

    Money that an individual or business receives in exchange for ...
  3. Bursary Award

    A type of financial award provided to certain students to assist ...
  4. Accumulated Income Payments - AIP

    Money withdrawn from a Canadian Registered Education Savings ...
  5. Tax-Deferred Savings Plan

    A savings plan or account that is registered with the government ...
  6. Earnings

    The amount of profit that a company produces during a specific ...
RELATED FAQS
  1. What are the risks involved in a banker's acceptance?

    College savings accounts are excellent ways to encourage saving for future college costs. Contact your investment professional ... Read Full Answer >>
  2. What is continuously compounding interest?

    An interest contract with continuously compounding interest is designed to maximize the total possible interest accumulation ... Read Full Answer >>
  3. What economic factors affect savings account rates?

    At a basic economic level, the interest rate set on savings account deposits is determined by the relationship between how ... Read Full Answer >>
  4. What is the difference between tier 1 capital and tier 2 capital?

    Under the Basel Accord, a bank's capital consists of tier 1 capital and tier 2 capital, and the two types of capital are ... Read Full Answer >>
  5. What is the rate of return I can expect on a savings account?

    Prior to the Great Recession, savings account rates offered by banks could typically be found in the 4 to 8% range, depending ... Read Full Answer >>
  6. How can I calculate the tier 1 capital ratio?

    Tier 1 capital, under the Basel Accord, measures a bank's core capital. The tier 1 capital ratio measures a bank's financial ... Read Full Answer >>
Related Articles
  1. Savings

    Don't Forget The Kids: Save For Their Education And Retirement

    Retirement and education financing are the two most important planning items for taxpayers.
  2. Insurance

    Investing In Your Child's Education

    Overwhelmed by increasing tuition costs for your kids? The U.S. government can help.
  3. Savings

    Canadian Grants And Tax Credits Fund Education

    RESPs and other grants help parents save for post-secondary education for their children.
  4. Retirement

    Tax Breaks For Canadian Families

    Canadians have a lot of advantages when it comes to family tax perks.
  5. Options & Futures

    Invest In Your Education With An RESP

    All Canadians should know the benefits of these flexible education savings plans.
  6. Savings

    Top Premium Checking Accounts of 2015

    Which banks offer the best deals for premium checking accounts – and what do you have to do to qualify for one?
  7. Professionals

    Help Parents Avoid This Retirement Savings Blunder

    Parents should make saving for their own retirement a priority over helping with their children’s college costs.
  8. Entrepreneurship

    Can I Become An Angel Investor?

    Because of SEC rules, you already need significant assets to become an angel investor.
  9. Investing

    Financial Gifts For Grads: Kindergarten To College

    If you really want to help your grad preparing for the future, consider a present that supports their long-term goals—an early start to financial planning.
  10. Taxes

    Top Tax Issues For High-Net-Worth Individuals

    Wealth brings benefits, but from a tax perspective it creates special challenges. Here are some tax issues to pay attention to.

You May Also Like

Hot Definitions
  1. Yield Curve

    A line that plots the interest rates, at a set point in time, of bonds having equal credit quality, but differing maturity ...
  2. Productivity

    An economic measure of output per unit of input. Inputs include labor and capital, while output is typically measured in ...
  3. Variance

    The spread between numbers in a data set, measuring Variance is calculated by taking the differences between each number ...
  4. Terminal Value - TV

    The value of a bond at maturity, or of an asset at a specified, future valuation date, taking into account factors such as ...
  5. Rule Of 70

    A way to estimate the number of years it takes for a certain variable to double. The rule of 70 states that in order to estimate ...
  6. Risk Premium

    The return in excess of the risk-free rate of return that an investment is expected to yield. An asset's risk premium is ...
Trading Center