A Registered Education Savings Plan (RESP) is a tax-sheltered savings plan designed to help Canadians save for a child’s post-secondary education. Contributions to an RESP are not tax-deductible, but the investment income earned in the plan grows tax-free until it is withdrawn to pay for a child’s education.

There are several benefits to opening an RESP for a child:

1. Government grants: The government of Canada offers two grant programs to encourage Canadians to save for a child’s education: the Canada Education Savings Grant (CESG) and the Canada Learning Bond (CLB). The CESG is a matching grant that can provide up to 40% of the first $2,500 in annual contributions, up to a maximum of $1,000 per year. The CLB is a grant for low-income families that can provide up to $2,000 to help pay for a child’s education. Both of these grants are deposited directly into the child’s RESP.
2. Tax-sheltered growth: The investment income earned in an RESP grows tax-free until it is withdrawn to pay for a child’s education. This means that the money can potentially grow faster than it would in a taxable investment.
3. Flexibility: Contributions to an RESP can be made at any time, and there is no limit to the amount that can be contributed. This gives parents the flexibility to save as much or as little as they can afford, depending on their financial circumstances.
4. Educational assistance payments: When a child is ready to start post-secondary education, the funds in their RESP can be used to pay for tuition, books, and other educational expenses. The money is paid to the educational institution in the form of educational assistance payments (EAPs), which are taxed in the hands of the student at their marginal tax rate. This can be beneficial because students often have low or no income, which means they may pay little or no tax on the EAPs.
5. Multiple beneficiaries: An RESP can have multiple beneficiaries, which means that a single plan can be used to save for the education of multiple children. This can be particularly useful for parents who have more than one child and want to save for their education.
6. Transferability: If a child does not use all of the funds in their RESP, the remaining balance can be transferred to another eligible family member, such as a sibling or cousin.

Overall, an RESP is a valuable tool for parents who want to save for their child’s post-secondary education. The government grants, tax-sheltered growth, and flexibility of the plan make it an attractive option for families who want to ensure that their children have the financial resources they need to pursue higher education.