Registered Education Savings Plan (RESP)
Registered Education Savings Plans (RESPs) are the little sister of RRSPs. They are investment vehicles specifically designed to help Canadians save to pay for the education of their children (or grandchildren or friend’s children). Like RRSPs there are restrictions on the use of the funds – in this case for qualified education expenses. While the definitions are complicated, essentially, RESPs can be used to pay for tuition, residence or other living expenses, books and some fees.
One strategy often used by savvy parents is to encourage grandparents and other relatives to contribute to their childrens’ RESPs through gifts at Christmas and Birthdays. Since it is often a tradition in families that the grandparents give small amounts of money to their grandchildren, the money can grow as an investment tax-free if the contribution is made to the RESP instead.