What is an RESP? A Complete Canadian Parent’s Guide to Registered Education Savings Plans
Published on June 18, 2025 | By WealthFusions Finance Team
RESP: Education Savings Plan
Save for your child’s education with government grants and tax-deferred growth.
1. Open an RESP Account
Available for Canadian residents; open for yourself or your child.
2. Contribute Funds
Deposit money up to your contribution limit to grow savings.
3. Receive Canada Education Savings Grant (CESG)
The government matches 20% of annual contributions up to $500 per year (max $7,200 lifetime).
4. Tax-Deferred Growth
Investment earnings grow tax-free until withdrawn for education.
5. Use Funds for Post-Secondary Education
Withdraw contributions tax-free; investment income is taxed in student’s hands (usually low tax).
6. Keep Account Open
RESPs can stay open up to 36 years to accommodate various education timelines.
7. Avoid Penalties
Withdraw funds only for qualified education expenses to avoid taxes and repay grants.
8. Maximize Education Savings
Combine government grants, tax growth, and early saving for best results.
Thinking about saving for your child’s education? A Registered Education Savings Plan (RESP) is one of the smartest, most tax-efficient ways to prepare for your child’s post-secondary future in Canada. This comprehensive guide covers everything you need to know—from government grants and contribution rules to provider comparisons and tax implications.
Whether you’re a new parent, newcomer to Canada, or just starting late, here’s how to make the most of your RESP in 2025.
1. What is an RESP?
An RESP is a government-registered savings account that allows you to save for your child’s post-secondary education. Contributions are not tax-deductible, but investment earnings grow tax-free until withdrawn.
- You can contribute up to $50,000 per beneficiary over the plan’s lifetime.
- The government provides matching grants up to 20% annually (CESG).
- Funds can be used for universities, colleges, trade schools, and certified programs.
2. How Government Grants Boost Your RESP
The Canadian government matches a portion of your RESP contributions through the Canada Education Savings Grant (CESG) and Canada Learning Bond (CLB).
| Grant Type | Eligibility | Amount | Max Lifetime |
|---|---|---|---|
| CESG (Basic) | All children under 17 | 20% of first $2,500/year | $7,200 |
| CESG (Additional) | Low/mid-income families | Extra 10–20% | Part of $7,200 max |
| CLB | Low-income families | $500 initial + $100/year | $2,000 |
Example: If you contribute $2,500 annually, you’ll receive a $500 CESG. Over 14 years, that’s $7,000 in free money—plus growth!
3. Contribution Rules and Limits
There is no annual limit, but the lifetime contribution limit per beneficiary is $50,000. Contributions are not tax-deductible but grow tax-free.
- You can contribute lump sums or monthly deposits.
- Carry-forward CESG room is available if you missed years.
- No penalties unless you exceed the lifetime limit—then 1% per month applies.
Strategy: Contribute at least $2,500/year to maximize CESG. For late starters, double up ($5,000/year) to catch up on unused grant room.
4. Taxation of RESP Withdrawals
RESP withdrawals are divided into:
- Contribution Amounts: Withdrawn tax-free.
- Educational Assistance Payments (EAPs): Includes grants + earnings. Taxable in the student’s hands (usually low or no tax).
Example: A student in university likely earns under the basic personal amount ($15,705 in 2025), so EAPs may be taxed at 0%.
5. What If My Child Doesn’t Go to School?
- You can transfer RESP to another child under 21 without penalty.
- Withdraw contributions anytime tax-free.
- Accumulated Income Payment (AIP): Investment earnings can be withdrawn with tax + 20% penalty or transferred to your RRSP (up to $50,000 if room exists).
Tip: Keep RESP open for up to 36 years in case your child goes back to school later.
6. Individual vs. Family vs. Group Plans
| Plan Type | Best For | Beneficiaries | Flexibility | Fees |
|---|---|---|---|---|
| Individual | One child | 1 | High | Low |
| Family | Multiple kids (related) | Unlimited | High | Low |
| Group | Set schedule, pooled funds | 1 per plan | Low | High, restrictive |
Recommendation: Avoid group plans due to high fees and lack of flexibility. Choose family or individual RESP through banks or robo-advisors.
RRSP vs TFSA vs RESP: Canadian Savings Plan Comparison
| Feature | RRSP Registered Retirement Savings Plan | TFSA Tax-Free Savings Account | RESP Registered Education Savings Plan |
|---|---|---|---|
| Purpose | Save for retirement | Save for any goal, flexible | Save for post-secondary education |
| Contributions | Tax-deductible, lowers taxable income | After-tax dollars, no tax deduction | After-tax dollars, no tax deduction |
| Contribution Limits (2025) | 18% of previous year’s earned income, up to ~$31,560 | $6,500 annual limit, cumulative unused room | Lifetime max $50,000 per beneficiary |
| Withdrawals | Taxed as income on withdrawal | Tax-free & flexible anytime | Tax-free for contributions; earnings taxed in student’s hands |
| Tax Treatment | Deferred tax; tax paid at withdrawal | Tax-free growth & withdrawals | Tax-deferred growth, income taxed on beneficiary |
| Government Incentives | No direct grants | No direct grants | Canada Education Savings Grant (CESG): 20% on contributions |
| Best For | High-income earners planning retirement | Flexible savings for any goal | Parents saving for kids’ education |
| Withdrawal Penalties | Taxed as income; penalties if early withdrawal without plan | No penalties, flexible use | Non-educational withdrawals may trigger tax and grant repayment |
| Account Duration | Until age 71, then convert or withdraw | Indefinite | Up to 36 years |
| Tax Filing Impact | Reduces taxable income in contribution year | No effect on taxable income | No effect on taxable income |
7. Best RESP Providers in Canada (2025)
Compare top RESP providers based on fees, flexibility, and customer satisfaction:
- Wealthsimple: Zero account fees, automated investing, user-friendly app.
- Questrade: Low-cost ETF RESP accounts with DIY control.
- RBC/TD/BMO: In-branch support, good for conservative investors.
- Knowledge First/Heritage: Group plans—avoid due to high fees unless fully understood.
8. RESP for Newcomers & Low-Income Families
You don’t need to contribute to get the Canada Learning Bond (CLB). If you qualify, the government will deposit up to $2,000 per child even if you contribute nothing.
- Requirement: Child born in 2004 or later, and family income below ~$53,000 (varies by province and children).
- Apply at any major bank or credit union, or online through robo-advisors like Wealthsimple.
9. How to Open an RESP (Step-by-Step)
- Get a Social Insurance Number (SIN) for your child.
- Choose a provider (bank, credit union, robo-advisor).
- Choose plan type (individual/family).
- Apply online or in person—takes 15–30 minutes.
- Set up monthly contributions or one-time deposits.
Conclusion & Action Plan
RESPs offer tax-free growth, generous government grants, and flexible options to fund your child’s future. The earlier you start, the more your money grows. Avoid restrictive group plans and start with low-fee, flexible providers like Wealthsimple or your bank.
Book a free RESP consultation with WealthFusions and unlock your child’s educational potential today!
Frequently Asked Questions
- 1. What happens if I miss a year of RESP contributions?
- You can catch up later—CESG allows $5,000 contribution/year to reclaim missed grants.
- 2. Can grandparents open RESPs?
- Yes, anyone can open an RESP for a child with their SIN, including grandparents and legal guardians.
- 3. What are the penalties for overcontributing?
- 1% per month on the excess amount until it’s withdrawn.
- 4. Can RESP funds be used for international studies?
- Yes, if the foreign school is an approved institution by the CRA.
- 5. Can I transfer RESP to an RRSP?
- Only earnings (AIP) if RESP is closed and you have unused RRSP room. Contributions cannot be transferred.
- 6. Can I change RESP providers?
- Yes, but ensure grant entitlements and investment holdings are transferred properly to avoid penalties.
- 7. How long can I keep an RESP open?
- Up to 36 years from the opening date. Ideal for gap years or late education.
- 8. Do I need to report RESP on tax returns?
- No. Contributions are not reported. Only EAPs must be reported by the student if withdrawn.