RESP (Registered Education Savings Plan)

What Is an RESP?

A Registered Education Savings Plan (RESP) is a government-registered account that helps Canadians save for a child’s post-secondary education. It allows your contributions to grow tax-deferred, and the government may contribute additional funds through grants.

RESPs are commonly opened by parents or guardians, but anyone can open one for a child—including grandparents, relatives, or friends.

How Does an RESP Work?

• You contribute money to the plan (there’s no annual limit, but there is a lifetime cap).
• The federal government adds grants through the Canada Education Savings Grant (CESG) and other programs.
• Investments grow tax-deferred, and withdrawals are taxed in the student’s hands—typically at a very low rate.
  

RESP Contribution Limits

• Lifetime contribution limit per beneficiary: $50,000
• No annual contribution limit, but CESG only applies to the first $2,500 contributed per year.
• CESG: 20% of contributions, up to $500 per year and $7,200 total per beneficiary.
• Additional grants may be available based on household income or provincial programs (e.g., CLB or Quebec’s QESI).

What Can an RESP Be Used For?

Funds in an RESP can be used for eligible post-secondary programs, including:

• University or college
• Trade schools
• Apprenticeship programs
• CEGEP (in Quebec)
• Some programs outside Canada

Withdrawals cover tuition, books, housing, transportation, and other education-related costs.

Types of RESP Accounts

Individual

One beneficiary; opened by anyone for a specific child

Family

Multiple beneficiaries; must be related by blood/adoption

Group

Pooled with other accounts; structured payout schedules

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Withdrawals: EAPs vs. Contributions

• Educational Assistance Payments (EAPs): Withdraw investment growth and government grants—taxable in the student’s name.
  
• Contribution withdrawals: Tax-free (you’ve already paid tax on this money).
  

If the child doesn’t attend post-secondary, options include:

• Transferring to another beneficiary
• Moving funds to an RRSP (up to $50,000, if conditions are met)
• Withdrawing the funds (subject to taxes and penalties on grants)
  

Key Benefits

• Tax-deferred growth
• Government grant support
• Flexible for different education paths
• Encourages long-term planning for future costs
  

Key Takeaways

• An RESP helps you save for a child’s education while receiving government grants.
• Investment growth is tax-sheltered, and withdrawals are taxed in the student’s hands.
• Starting early maximizes compound growth and grant eligibility.

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