A Registered Education Savings Plan (RESP) is a tax-advantaged savings account designed to help Canadians save for post-secondary education. The Canadian government sweetens the deal by adding money through grants and bonds — government incentives that can add additional funds toward a child's future education costs (subject to eligibility rules). Anyone can open and contribute to an RESP, whether you're a parent, grandparent, aunt, uncle, or a family friend who wants to help out.
There are three important entities involved in an RESP:
Subscriber: the person who opens the RESP and contributes to it.
Beneficiary: the child (or future student) who receives the money for education and related expenses. Family plans can have multiple beneficiaries.
Promoter: an organization that offers RESPs, such as a bank or financial institution, credit union, or group scholarship provider.
This article covers how RESPs work, who can open one, the different types available, government grants you may be eligible for, and what happens if the money doesn't end up being used for school.
How RESPs work in Canada
An RESP works by letting you contribute savings for a child's education while the government adds matching grants. The Canada Education Savings Grant (CESG) is generally 20% of contributions, up to annual limits. The money grows tax-deferred through investments, and when the student withdraws it for school, they often pay minimal tax because student incomes are typically lower while they're in school (and withdrawals are taxed at the beneficiary’s tax rate).
Think of it as three distinct money streams working together:
Your contributions: the money you deposit into the account.
Government grants and bonds: government incentives that may be added by the federal (and sometimes provincial) government, depending on eligibility.
Investment earnings: growth from investing the combined funds.
Each stream is treated differently for tax purposes when withdrawn.
Who can open an RESP
Anyone can open an RESP — parents, grandparents, aunts, uncles, or family friends. The person who opens the account is called the subscriber, and the future student is the beneficiary.
To open an account, both the subscriber and the beneficiary need a Social Insurance Number (SIN) and must be Canadian residents. You can open an RESP for yourself if you're an adult planning to go back to school, though government grants only apply to children.
There's no minimum age to become a beneficiary, which is why many parents open an RESP shortly after their child is born. The earlier you start, the more time your money has to grow through compound interest.
Types of RESPs
There are three types of RESPs you could open:
Individual or non-family RESP
Anyone can become a subscriber by setting up an individual RESP for a single beneficiary. Eligible beneficiaries can receive theCESG and Canada Learning Bond (CLB).
The subscriber doesn't have to be related to the beneficiary by blood or adoption. They can follow a flexible payment schedule to make contributions until the plan hits its maximum lifetime contribution amount.
Family RESP
A family RESP can have one or more beneficiaries, but they need to be related to the subscriber by blood or adoption (such as a stepchild, sibling, or grandchild). The subscriber can self-direct the payment plan and make contributions as desired.
For a family plan shared by siblings, the contributions and grants can be shared between them. If one child doesn't use their entire portion, the funds can be redirected to the other sibling's education. While the CESG can be shared with siblings, each beneficiary is entitled to a maximum CESG of $7,200.
Group RESP
Like the individual RESP, a group RESP can be set up for only one child, who may or may not be related to you. Group plans tend to have more rules and restrictions than the other options.
The payment schedule is typically fixed, and there are penalties for missed payments. Your contributions go into a shared pool of earnings along with other investors who have children of the same age starting school that year.
Government grants and bonds explained
One of the main reasons people use an RESP is access to government incentives that can add funds to your savings, depending on eligibility. Here's what's available:
Grant type | Who qualifies | Amount | Requires your contribution |
|---|---|---|---|
| Canada Education Savings Grant (CESG) | All Canadian children under the age of 18 | 20% match up to $500/year (max $7,200 lifetime) | Yes |
| Additional CESG | Lower-income families | Extra 10-20% on first $500 contributed | Yes |
| Canada Learning Bond (CLB) | Lower-income families | Up to $2,000 per child | No |
| Provincial grants | Varies by province (B.C., Quebec) | Varies | Yes |
The CLB is deposited directly into the eligible RESP without requiring any personal contributions.
Benefits of RESPs
RESP grants: the federal government matches 20% on yearly contributions up to $2,500 (max $500/year for the CESG). Lower-income families can receive additional CESG matching as well as the CLB. British Columbia offers an additional grant and Quebec offers an education savings incentive.
Tax-deferred growth: you don't pay taxes on investment gains while the money stays in the RESP.
Low or no tax on withdrawals: students typically pay little to no tax on Educational Assistance Payments (EAPs) because of their lower income.
Investment flexibility: you can invest in mutual funds, exchange-traded funds (ETFs), guaranteed investment certificates (GICs), stocks, and bonds.
Anyone can contribute: grandparents, aunts, uncles, and friends can all add money to help a child's education fund.
Flexible program eligibility: funds work for universities, colleges, trade schools, and apprenticeships.
Long window to use funds: RESPs stay open for 36 years, giving beneficiaries time to decide on their education path.
Adults can open RESPs too: if you're going back to school, you can benefit from tax-deferred growth (though not government grants).
Drawbacks of RESPs
Grant funds must be returned: if the child doesn't pursue post-secondary education, any government grants go back to the government.
Taxes and penalties on unused investment earnings: If the beneficiary doesn’t pursue post-secondary education, the Accumulated Income Payments (AIPs) are generally taxed at the subscriber’s regular rate plus an additional 20% (subject to applicable rules).
Less flexible than other accounts: unlike a Tax-Free Savings Account (TFSA), you can't withdraw RESP money for non-education purposes without consequences.
Contribution and grant limits
While you can contribute as much as you want in a single year, there's a lifetime contribution limit of $50,000 per beneficiary. If you accidentally contribute more than that, you'll face a 1% monthly tax on the excess amount until it's withdrawn.
For government grants, no child can collect more than the maximum lifetime limit of $7,200 from the CESG, regardless of family income. The CLB has a separate lifetime maximum of $2,000 per beneficiary.
It's important to think about estate planning. If the account was opened by a sole subscriber who passes away and their will does not specify what should happen to the RESP, the account will likely be handled as part of the estate and administered according to provincial/territorial rules. The account does not automatically transfer to the RESP beneficiary.
To help ensure the money still goes toward the child's education, consider setting up a joint subscriber or clearly outlining your wishes in your will.
How to maximize the CESG
The Canadian government matches 20% of your contribution in an RESP up to $2,500 per year through the CESG. This means that if you contribute $2,500 in a year, you receive $500 for the year.
To maximize the RESP grant, you would need to contribute $2,500 per year, per child (beneficiary) for 14 years. Then top it off with an extra $1,000 in the 15th year to receive the maximum CESG of $7,200 per beneficiary.
You can receive an additional $500 per year in CESG if you missed the previous year's set of grants — this is called "carry-forward room."
In the event you accidentally over-contribute to an RESP you will need to reduce the balance to $50,000 in order to prevent tax penalties. Consider transferring the excess contributions into a Tax-Free Savings Account (TFSA).
RESP withdrawal rules
There are many rules specific to RESP withdrawals. Here are the basics of what you should know:
Only the subscriber can request withdrawals: withdrawals of contributions are called Post-Secondary Education Payments (PSE payments) and can go to either the subscriber or beneficiary. Withdrawals of grants and bonds can only go to the beneficiary as EAPs.
PSE payments aren't taxable.
EAPs are taxed in the student's hands: an EAP consists of earnings and grant money. The financial institution will issue a T4A tax form in the student's name.
Early withdrawal limits apply: for full-time students, there's an $8,000 EAP limit ($4,000 for part-time) during the first 13 weeks. After 13 weeks, any amount can be withdrawn.
The subscriber must provide the student's proof of enrollment before accessing funds.
What happens if you don't use your RESP
While the RESP can remain open for 36 years before it needs to be used, if the beneficiary decides not to pursue post-secondary education at all, you have the following options:
Withdraw from the RESP: you'll pay taxes on the investment earnings only (not on any personal contributions), and any government grants must be returned.
Transfer to another RESP: the entire amount (including grants) can be transferred to another beneficiary without penalties. For family plans, other beneficiaries can use the funds as designated by the subscriber.
Transfer to an RRSP: to defer taxes, up to $50,000 (not including government grants received) can be transferred to you or your spouse’s Registered Retirement Savings Plan (RRSP) if you have contribution room. The RESP must have been active for at least 10 years and all beneficiaries must be at least 21 years old.
RESP vs TFSA
TFSAs and RESPs are both tax-advantaged savings accounts with different purposes. Here's how they compare:
Government grants: RESPs may qualify for government grants; TFSAs do not.
Withdrawal flexibility: TFSAs can generally be used for any purpose; RESPs are intended for education, and non-education withdrawals can have consequences.
Tax treatment: Both accounts can be tax-advantaged, but RESP withdrawals of grants and investment earnings are generally taxed to the student.
One key difference is estate planning. You can name beneficiaries for a TFSA, but not for an RESP.
To help keep the plan managed smoothly in your absence, consider adding a joint subscriber who can take over administering the RESP if you're no longer able to.
