Registered Education Savings Plan - RESP

A “Registered Education Savings Plan,” or RESP, is a Canadian savings plan that helps parents and loved ones save for a kid’s college tuition. It’s like a long-term, government-backed GoFundMe. A "GovFundMe," if you will.

As soon as a child is born, a RESP can be set up by the kid’s parents or other legal guardian. Once it’s established, anyone can contribute to it, including parents, grandparents, aunts, uncles, friends...even random strangers. Until the kid turns 18, the Canadian government will even match a portion of the contributions made to the account, which is pretty sweet. Know what else is pretty sweet? When the recipient of the account withdraws those funds, they don’t have to pay taxes on them.

All that sweetness does come with a few caveats. First, while the contributions themselves aren’t taxed on withdrawal, anything the account earned (like interest) does get taxed. So there’s that. Second, even though one kid can have more than one RESP, the total max amount for all of his or her RESPs can’t exceed $50,000. Still a nice chunk of change, to be sure, but since the average four-year degree can cost anywhere from $32,000 to upwards of $120,000, we might need to do a little more saving on top of the RESP. And third, there are rules about how the money can be used. We have to at least start making withdrawals within 36 years of the account being opened, or the Canadian government can request their funds back. And if we use it for something other than a post-secondary education, we could end up paying big fees to do so.