Registered Education Savings Plans (RESPs) are one of the best ways to help you, your children, or your grandchildren make the dream of college or university a possibility. RESP's are:
Flexible: Anyone can open and contribute to an RESP, and there are options available should your beneficiary choose not to pursue post-secondary education. Funds can be used to cover an array of post-secondary expenses; including tuition fees, textbooks, and room and board. A minimum contribution of only $25 per month is required.
Tax-sheltered: You do not need to pay tax on any investment income associated with RESPs. Withdrawals are taxed to the student beneficiary at his or her marginal tax rate which is typically in the lowest tax bracket.
Canada Education Savings Grant (CESG)
Canada Learning Bond (CLB)
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Anyone can contribute to an RESP. You will just need a valid SIN (Social Insurance Number) to apply.
Individual plan: you can contribute to the RESP for 31 years following the year the plan was opened.
Family plan: contributions under a family plan must cease upon the beneficiary turning 31.*To qualify for government grants under both individual and family plans, you must make contributions by the end of the year the beneficiary turns 17.
The subscriber is the person who opens the RESP and is the registered owner of the plan. Anyone can open an RESP – a parent, grandparent, family friend, or joint subscribers such as spouses.
How much you can earn from federal and provincial government grants will depend on a number of factors.
- How much you contribute
- When you contribute – early, regular contributions benefit from compounding growth on government grants
- Where you live – not all provincial governments provide grants
- Your family income
The subscriber can request educational assistance payments to cover expenses associated with attending a qualifying post-secondary educational program. These payments are taxable to the beneficiary at his or her marginal tax rate.
If a beneficiary does not pursue post-secondary education, there are several options for the RESP plan:
- Change the plan’s beneficiary
- Transfer the funds to another RESP
- Collapse the plan
*If you choose #3, you will have to return the unused government grants (CESG, CLB). The RESP contributions can be withdrawn without penalty.
*Some restrictions and/or penalties may apply to all options.
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