RESP
The Canadian government supports Registered Education Savings Plans (RESPs), which promote saving for a child’s post-secondary education. Contributions made by RESP participants accrue tax-free earnings. For youngsters under the age of 18, the government contributes a set amount to these schemes.
Parents in Canada have the option to save money aside for their children’s education through Registered Education Savings Plans (RESPs). To open a RESP account, guardians must visit a bank or other financial institution. Anyone can contribute here to help the child. Additionally, the government deposits the funds into the child’s account and matches them up to a set proportion. The Canadian Education and Savings Grant is the name given to the additional monies that the government deposits. The grant can only be up to a maximum of $7,200.
RRSP
An RRSP is a savings plan designed to help employees save for retirement after they stop working. Self-employed people can also participate in the program, and it can be used as an investment vehicle. The pre-tax funds are kept inside an RRSP account, and they grow tax-free until you withdraw the money. However, when you do this, you are taxed at a very marginal rate (usually less than 1%). This means that even if your entire balance is withdrawn at once, you’ll only end up paying taxes on a fraction of what was originally deposited into your account.
The Registered Retirement Savings Plan (RRSP) was enacted by the Canadian government in 1957 and is registered with the Canada Revenue Agency. These laws govern RRSP contributions, asset limits, and withdrawal timings.