A great way to save for your child’s education

Confident mature African American mom helps her young adult daughter study for a college exam.

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You’ve made saving for your child’s post-secondary education a priority because you understand that their education is the foundation of their career and future success. Now that they’ve graduated from high school, it’s a good time to get answers about Registered Education Savings Plan (RESP) withdrawal rules, limits, and tax strategies to make sure those savings are withdrawn with the best course of action.

When can funds be withdrawn from an RESP?

RESP funds can be withdrawn once the child has graduated from high school and officially accepted their post-secondary program offer from a qualified post-secondary institution.

What can RESP funds be used for?

RESP funds can pay for all educational costs at eligible post-secondary institutions related to:


What is a qualified post-secondary institution in Canada?

There are several options in Canada where RESP funds can be used, including:

  • colleges and universities

  • general or vocational college

  • business schools

  • religious schools

  • qualifying international schools

  • other establishments approved by the Minister of Employment and Social Development

What are the different types of withdrawals and the maximum withdrawal amounts?

There are two types of RESP education withdrawals, with varying maximum withdrawal amounts.

1. Post-Secondary Education (PSE) withdrawals are funds accumulated from Subscriber Contributions that come from after-tax funds. PSE contributions have no withdrawal limit.

2. Educational Assistance Payment (EAP) withdrawals are funds from investment earnings and government grants. In Ontario, government grants include the Canada Education Savings Grant (CESG) and the Canada Learning Bond (CLB). EAP withdrawals have a limit of $5,000 if the beneficiary is enrolled full-time and a limit of $2,500 if the beneficiary is enrolled part-time for the first 13 weeks. schooling. Once the 13 weeks have passed, any amount can be withdrawn.

How are RESP withdrawals taxed?

Withdrawals from the PSE portion of the RESP are tax exempt. Withdrawals from the EAP portion constitute taxable income for the student beneficiary, who, as a student, is generally subject to a lower marginal tax rate, since they generally have lower earned income and benefit from credits. tuition and education tax. Each student beneficiary cannot receive more than $7,200 in Canada Education Savings Grant over their lifetime.

What happens if RESP beneficiaries do not attend post-secondary school?

If the beneficiary decides not to pursue post-secondary education, there are options to consider:

  • Leave money saved in the RESP. Funds can be left in the plan for up to age 36, so you can leave the money as is in case the child changes their mind.

  • Replace the RESP beneficiary. In an individual plan, you can choose to designate another person as beneficiary. In a family plan, beneficiaries can share the grant and earnings. Either way, the money saved in the RESP can still be used to cover education costs.

  • Transfer RESP money to your RRSP. You can transfer up to $50,000 of non-taxable RESP income to your RRSP if the RESP has been open for at least 10 years, the beneficiaries are at least 21 years old and you have RRSP contribution room.

  • Close the RESP and keep your contributions. If you decide to close the RESP, the grant and bonds are returned to the government. You receive income if the plan has been open for at least 10 years and the beneficiaries are at least 21 years old.

  • Transfer RESP money to a Registered Disability Savings Plan (RDSP). Consider this option if the RESP and RDSP share a common beneficiary, the beneficiary has a severe and prolonged mental impairment that prevents them from completing post-secondary education, the RESP has been open for at least 10 years, the beneficiary is at least 21 years old and if the RESP has been open for at least 35 years.

FirstOntario Credit Union, in partnership with Credential Securities and Credential Asset Management Inc., has an experienced team of advisors specializing in various areas of wealth management, including retirement planning, investment management, estate planning and succession, individual financial risk management and more. These professionals are there to help you plan for the future and achieve your financial goals. Visit FirstOntarioInvestments.com or call 1-800-616-8878 ext. 1700 to connect with a FirstOntario advisor and start growing your wealth today – your way.

Mutual funds, other securities and securities-related financial planning services are offered by Credential Securities, a division of Credential Qtrade Securities Inc. Credential Securities is a registered trademark owned by Aviso Wealth Inc. Mutual funds investment and related financial planning services are offered by Credential Asset Management Inc.

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