In Canada, this is a registered education savings plan.
RESPs are used by Canadian parents to save for their children’s future postsecondary education. It is recommended that parents begin an RESP as soon as their child is born. To start an RESP, parents must first obtain a Social Insurance Number (SIN) for their child.
Contributions to RESPs are not tax deductible, but the federal government offers a grant of up to $500 per year, per child, under its Canada Education Savings Grant program. Parents, grandparents, relatives or friends can make contributions to the maximum of $4,000 per year, per child. There is a lifetime contribution limit of $42,000 per child. Non-family plans can receive contributions for 22 years, while family plans can only receive contributions until the beneficiary is 21 years of age. All plans must be terminated 26 years after they are opened.
The money in an RESP accumulates, tax-free, until it is paid out via an Educational Assistance Payment. Payments are taxed, but since students typically have little money, they end up paying little tax on the educational assistance payments they receive.
RESPs allow for parents to recoup their investment if their children decide not to pursue a postsecondary education.