To receive payments from a Registered Education Savings Plan (RESP), you must show proof that your child is taking a qualified program of studies. How much your child gets depends on what you made by investing your savings and grants. If you have an individual or family plan, the payments will come from two sources:
1. Your contributions
You can use the money to pay for your child's education (less any fees). Or, you can ask for a refund and spend the money on something else. Either way, there is no tax on this money.
2. Educational Assistance Payments (EAPs)
These provide money to your child using government grants, plus all the money you made investing over the years. In most cases, you choose the amount and timing of the payments. You can spread out EAPs over the years the child will be in school. But your child cannot get more than $5,000 until they complete 13 weeks in a row in their program.
Also, your child will have to pay income tax on the EAPs they receive. However, since they are students, and since most students have fairly low incomes, they will likely pay little or no tax.
Tip: If you have an RESP from a financial institution, they may not use the term EAP with you, but will simply tell you how to turn the money in your RESP into payments to your child.
Remember: RESPs are meant to fund your child?s education
To receive Educational Assistance Payments, your child must show proof they are enrolled in a qualified program of study. If they do not, you may have to give back the money you received from government grants.
Content in this section is provided in partnership with the Investor Education Fund, a non-profit organization promoting financial literacy to Canadians. To find out more go to GetSmarterAboutMoney.ca.