RESP
Tax-deferred growth plus a 20% government grant on contributions, for a child’s post-secondary education.
The basics
An RESP lets you save for a beneficiary’s post-secondary education with tax-deferred growth and, critically, a government grant that adds 20% on top of your own contributions.
Contributions themselves aren’t tax-deductible, but the growth and grants inside the plan aren’t taxed until withdrawn — and when withdrawn for education, they’re taxed in the student’s hands, typically at a very low or zero rate.
There’s no annual contribution cap, only a lifetime one — so you can catch up in a single large contribution if you started late, subject to the grant’s own annual matching limits.
How much you can put in
Lifetime contribution limit is $50,000 per beneficiary, with no annual maximum.
The Canada Education Savings Grant (CESG) matches 20% of contributions, up to $500/year (on the first $2,500 contributed that year), to a lifetime maximum of $7,200 per beneficiary.
Unused CESG grant room carries forward and can be caught up (at $1,000/year in grant, i.e. matching $5,000 of contributions in a single catch-up year) until the beneficiary turns 17 — but the $7,200 lifetime cap still applies.
Lower-income families may also qualify for the Canada Learning Bond (CLB), worth up to $2,000 over the life of the plan, with no contribution required to receive it.
RESP tax treatment
| Treatment | |
|---|---|
| Contributions | Not tax-deductible |
| Growth and grants inside the account | Tax-deferred |
| Withdrawn contributions (Post-Secondary Education, "PSE") | Tax-free — return of your own after-tax money |
| Withdrawn growth + grants ("EAP") | Taxed in the student’s hands, usually at little or no tax given typical student income |
| Effect on income-tested benefits | RESP withdrawals are attributed to the student, not the contributing parent, so they generally don’t affect the parent’s benefits |
The grant, stacked against your own money
RESP: your contribution vs. the CESG match
Contributing $2,500/year captures the full 20% Canada Education Savings Grant, until the $7,200 lifetime cap is reached.
Illustrative at the $2,500/year contribution level. Grant matching continues until the $7,200 lifetime cap per beneficiary is reached, shown here partway through year 15.
Getting money out
Contributions can be withdrawn by the subscriber at any time, tax-free, since they were never deductible.
Educational Assistance Payments (EAPs) — the grant and growth portion — require proof of enrollment in a qualifying post-secondary program, and are capped at $8,000 for the first 13 weeks of full-time study (uncapped after that, subject to reasonableness).
RESPs must generally be collapsed within 35 years of being opened (40 years for a plan with a beneficiary eligible for the Disability Tax Credit).
What happens if you go over
Contributing beyond the $50,000 lifetime limit per beneficiary triggers a 1% per month tax on the excess amount until it’s withdrawn.
Is this a fit?
- Parents, grandparents, or other family members saving for a child’s post-secondary education
- Anyone who wants "free" government matching money — the CESG is one of the highest guaranteed returns available for education savings
- Families who can contribute at least $2,500/year per child to capture the full annual CESG match
How it fits with the rest of your plan
- RESP grants and growth are separate from RRSP and TFSA room — contributing to an RESP doesn’t use up either.
- If a child doesn’t pursue post-secondary education, up to $50,000 of the growth portion (not grants, which are repaid to the government) can generally be transferred to the subscriber’s RRSP, if they have the room.
- Family RESPs (covering multiple children) allow grant room and growth to be shared among siblings, which can help if one child’s education costs less than others.
What trips people up
- Not contributing at least $2,500/year per child, leaving CESG matching money unclaimed
- Waiting too long to open the plan — CESG catch-up is capped at $1,000/year in grant, so large gaps are hard to fully recover before the beneficiary turns 17
- Withdrawing EAPs inefficiently — a large lump-sum EAP withdrawal in one year can push a student’s income tax bill up unnecessarily; spreading withdrawals across years is often more efficient
- Not understanding that if the RESP is collapsed without a beneficiary pursuing education, the CESG and CLB portions must be repaid to the government
Eligible investments
Cash, GICs, mutual funds, ETFs, individual stocks and bonds, and segregated fund contracts, similar to a TFSA or RRSP.
Segregated fund RESPs add maturity guarantees on the invested portion, which can appeal to risk-averse families saving over a fixed, relatively short time horizon before funds are needed.
A parent contributing $2,500/year from birth receives the full $500/year CESG match; by age 18 that’s $45,000 in contributions plus $9,000 in grants (capped at the $7,200 lifetime maximum) — call it roughly $52,200 in contributions and grants before any investment growth.
Actual outcomes depend on your income, tax situation, and the rules in effect when you contribute or withdraw. Contact Achyut for guidance specific to your situation.