What Is a RESP (Registered Education Savings Plan)?
A Registered Education Savings Plan (RESP) is a government-registered investment account in Canada designed to help parents or guardians save for a child’s post-secondary education. Contributions are not tax-deductible, but investment income grows tax-free until withdrawn.
How Does the RESP Work?
RESPs work in three key stages:
📥 1. Contribution Phase
You make regular or lump-sum contributions. Although they’re not tax-deductible, they grow tax-free and can trigger government matching.
📈 2. Growth Phase
Your investments grow over time inside the RESP without being taxed.
💸 3. Withdrawal Phase
Once your child starts post-secondary education, the money can be withdrawn as:
Educational Assistance Payments (EAPs): taxable in the student’s hands
Refund of Contributions (ROCs): non-taxable withdrawals of your original contributions
What Government Contributions Can You Get?
Canada Education Savings Grant (CESG)
20% on the first $2,500/year per child
Up to $500/year, with a lifetime max of $7,200
Canada Learning Bond (CLB)
Up to $2,000 for low-income families
No contributions required to receive this benefit
Who Can Open a RESP?
Anyone a parent, grandparent, family friend, or legal guardian can open a RESP for a child, as long as the child has a valid Social Insurance Number (SIN)
Types of RESP Accounts
📄 Individual Plan
One beneficiary
Doesn’t need to be related
👨👩👧 Family Plan
Multiple children as beneficiaries
Must be related by blood or adoption
📊 Group Plan
Pooled savings with others
Stricter rules, lower flexibility
Contribution Limits and Deadlines
Lifetime limit: $50,000 per child
No annual limit, but only the first $2,500/year earns full CESG
Account can remain open for 35 years
Contributions accepted for up to 31 years
What If the Child Doesn’t Go to School?
You can:
Transfer RESP to another child (family plans)
Move up to $50,000 to your RRSP (if you have room)
Withdraw funds with penalty (income portion taxed + 20% penalty)
Government grants must be returned if unused
Pros and Cons of Using a RESP
✅ Pros
- Tax-free investment growth
- Government contributions (CESG & CLB)
- Encourages long-term education planning
- Multiple plan options (individual, family)
- Funds transferable under conditions
❌ Cons
- Must be used for education (or face penalties)
- Grant money must be returned if unused
- Group plans can be inflexible
- Limited to Canadian-approved institutions (mostly)
- Somewhat complex withdrawal rules
Frequently Asked Questions (FAQ)
Can I open a RESP if I'm self-employed or a sole proprietor?
Absolutely. RESPs are personal accounts, not tied to your business status.
Is RESP money taxed when withdrawn?
Only the EAP portion (grants + income) is taxed, and only in the student’s name (often at low tax rates). Your contributions (ROC) are not taxed.
What if my child studies outside Canada?
RESPs can be used at many foreign institutions that qualify. Always check eligibility with the CRA or plan provider
Can I transfer a RESP to another child?
Yes, especially in a family plan. However, CESG limits still apply per beneficiary.
💬 Want to Learn More About RESP?
We offer a free 15-minute consultation to help you get started with education savings in Canada.
📅 Book Your Free Consultation