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A Registered Education Savings Plan, or RESP, is an investment plan used by parent, friend or family member to save for their children's post-secondary education in Canada.
With the help of an RESP you, as a parent, friend or family member, can start building financial resource for a child's post-secondary education. Your investment can grow surprisingly quickly when you use this special savings account, as the Government of Canada offers the Canada Education Savings Grant and the Canada Learning Bond exclusively to RESP subscribers.
RESP was introduced to benefit post-secondary students and giving them tax shelter. With an RESP, the contributor's tax rate is applied to contributions, while the investment growth (and CESG) is taxed on withdrawal at the recipient's tax rate. An RESP recipient is typically a post-secondary student; these individuals generally pay little or no federal income tax, out of tuition and education tax credits. Thus, with the tax-free principal contribution the student will have a good source of financial resource to fund his or her post-secondary education.