A Registered Education Savings Plan (RESP) is one of the most powerful savings tools for Canadian families. It combines tax-sheltered growth with government grants — free money that accelerates your child's education fund. This guide covers everything you need to know.
An RESP is a government-registered savings account where contributions grow tax-free until withdrawn for qualifying post-secondary education. The beneficiary pays tax on withdrawals — typically at a very low student rate — while the original contributions return to the subscriber tax-free.
The Canada Education Savings Grant (CESG) matches 20% of your first $2,500 contributed per year — a guaranteed $500 annual grant. Lower-income families receive additional CESG of 10-20% on the first $500. The Canada Learning Bond (CLB) adds up to $2,000 for qualifying low-income families with zero contributions required.
No annual limit — only a $50,000 lifetime cap per beneficiary across all plans. CESG is earned on the first $2,500/year of contributions. Unused CESG room carries forward and can be caught up at $5,000/year (capturing $1,000 CESG). Over-contributions trigger a 1% per month penalty.
Individual plans name one beneficiary and allow any subscriber. Family plans cover multiple related children and allow fund sharing. Group (scholarship) plans pool contributions from many families — less flexible and often higher fees than self-directed options.
Self-directed RESPs allow GICs, ETFs, mutual funds, bonds, and stocks. Low-cost index ETFs are optimal for long-term growth. Shift to conservative fixed income as the child approaches enrollment age to protect accumulated funds from market volatility.
Post-Secondary Education (PSE) withdrawals return your contributions tax-free. Educational Assistance Payments (EAPs) — grants and growth — are taxed in the student's hands at their low marginal rate. EAPs are capped at $8,000 in the first 13 weeks of enrollment for full-time students.
Options include changing beneficiaries, transferring up to $50,000 of investment income to your RRSP, keeping the plan open for 35 years, or closing and repaying grants. Plan for flexibility — educational paths change.
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