Registered Education Savings Plans (RESPs)
RESPs are government approved plans designed to assist and encourage Canadians to save for post-secondary education.
RESPs are not specific investments, but a vehicle used to hold a variety of investments and shelter them from taxes. Contributions to an RESP grow tax-free but unlike RRSPs, they are not tax deductible.
If you invest $2,000 per year (beginning of period) in an RESP (no CESG Grant) at 10%, it will grow to $100,318 after 18 years.
The same amount in a non-RESP investment would grow to only $65,520 or $34,798 less than the RESP. Since the non-RESP is not sheltered, it only grows at an after tax rate of return of 6%.