RESPs Explained: A Smart Way to Save for Your Child’s Education in Canada
If you’re a parent, grandparent, or just someone who wants to set a child up for success, then the Registered Education Savings Plan (RESP) should definitely be on your radar. It’s a powerful tool designed to help you save for a child’s post-secondary education — whether they choose university, college, trade school, or another eligible program.
In this blog post, we’ll break down how RESPs work, who can open one, the perks of government grants, and what happens if your child doesn’t end up pursuing school right away.
What is an RESP?
An RESP is a special savings account designed to help families save for education. While your contributions are not tax-deductible like an RRSP, the money inside the RESP grows tax-free. And when it’s withdrawn for educational expenses, it’s taxed in the student’s hands — which usually means very little tax, since most students have low income.
Government Grants: Free Money Toward Education
One of the biggest benefits of the RESP is the Canada Education Savings Grant (CESG). This grant matches up to 20% of your annual contributions, up to a maximum of $500 per year, and a lifetime maximum of $7,200 per child.
Here’s how it works:
Contribute $2,500 in a year = Get $500 in grants
Do this consistently to max out the full CESG over time
For lower-income families, the Canadian Learning Bond (CLB) is another valuable resource. If your household income is under $50,000 and you meet the eligibility requirements, your child can receive:
$500 upfront just for opening an RESP
An additional $100 per year until age 15.
And that’s not all — some provinces such as Quebec and British Colombia also provide additional education grants on top of the federal ones!
Tax Benefits
While RESP contributions themselves aren’t tax-deductible, the real perk lies in how the money grows. Your investments inside the RESP grow tax-deferred, meaning you won’t pay taxes on any interest, dividends, or capital gains while the funds stay in the account. When your child begins making withdrawals for school, the government grant and investment growth portions are taxed in their name — and since most students have little to no income, the tax owed is usually minimal. This helps stretch your savings further during those key education years.
What If Your Child Doesn’t Go To School?
This is a common concern, and the good news is that there’s flexibility. RESP funds can be used for a variety of qualifying programs, not just university — think college, apprenticeships, and vocational training.
But if your child doesn't pursue any post-secondary education, here’s what happens:
Close the account and keep your original contributions
You can transfer the investment to other registered savings plans
Keep the RESP open and leave the money in it for future studies
Replace the beneficiary
Who Can Open an RESP?
Anyone can open an RESP — a parent, grandparent, aunt, uncle, family friend, or even yourself. All you need is the child’s Social Insurance Number (SIN).
There are three types of RESP accounts:
Family Plan: Perfect for families with multiple children. You can pool your savings and allocate the funds as needed. Only parents or grandparents can open this type.
Individual Plan: This plan is for one child, and you don’t need to be related to them.
Group Plan: This plan pools money with other investors. It can be attractive on the surface but comes with high fees, strict rules, and has been involved in past legal disputes. Be sure to read the fine print carefully before committing.
Contribution Limits:
Lifetime contribution limit per child: $50,000.
To max out the CESG over time: Aim to contribute $2,500 a year.
Over-contributions will result in penalties and interest, so track them carefully.
When Can the Child Withdraw?
Once your child starts a qualifying post-secondary program (usually at age 18 or older), they can begin making withdrawals. These funds can be used for:
Tuition
Textbooks
Rent
Transportation
Other education-related expenses
And again — since most students don’t have high taxable income, they’ll likely pay little to no tax on the RESP withdrawals.
Final Thoughts
If you’re thinking about how to support a child’s future, an RESP is a no-brainer. Between the free government money, tax-sheltered growth, and flexibility, it’s one of the smartest and most generous education savings tools in Canada.
🎥 Want to Learn More?
If you’re more of a visual learner, I’ve also broken this topic down in a video on my YouTube channel. I walk through how RESPs work, how to make the most of government grants, and I share tips from my own experience helping families set these up.
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