PREV ARTICLE
NEXT ARTICLE
Graduation day, back view of Asian woman

RESP Basics: What Every Canadian Should Know

07.29.26 // Markets & Investing // Blog Article

Basics, Background, and Benefits

A Registered Education Savings Plan (RESP) is one of the most effective ways for Canadians to save for a child's post-secondary education. An RESP is a government-registered savings plan that allows investments to grow on a tax-deferred basis while benefiting from valuable government grants. An RESP is designed to help families save for eligible post-secondary education expenses, including tuition, books, tools, housing, transportation, and other related costs.


Who Can Open an RESP?

The individual who opens and contributes to the plan is called the subscriber, and can include parents, grandparents, other relatives, or other caregivers. The funds that the subscriber contributes to the RESP are for the use of a named beneficiary. Family RESP accounts can have more than one beneficiary, and to be named as a beneficiary, you must have a valid Social Insurance Number (SIN) and be a resident of Canada.


Contributions and Withdrawals

Although contributions are not tax-deductible, the combination of tax-deferred growth and government grants can significantly increase education savings over time. Below is an outline of the contribution rules:

  • Lifetime contribution limit of $50,000 per beneficiary across all RESPs
  • Contributions can generally be made for up to 31 years after the plan is established
  • You have up to 35 years to use the funds before the account must be closed

There are also government grants that can be received in RESP accounts:

  • Canadian Education Savings Grant (CESG): The federal government contributes 20% of annual contributions, up to $500 per year on the first $2,500 contributed, with a lifetime maximum of $7,200 per beneficiary. There is also an additional grant of up to 20% on the first $500 contributed annually for lower- and middle-income families
  • B.C. Training and Education Savings Grant (BCTESG): This is a one-time $1,200 grant that children in B.C. can receive in their RESPs when their application is made between their sixth and ninth birthday
  • Canada Learning Bond (CLB): Eligible lower-income families may receive up to an additional $2,000 per child

When a beneficiary enrolls in an eligible post-secondary program, they can withdraw funds in a combination of:

  • Education Assistance Payments (EAPs): These consist of government grants and investment growth, and are taxable in the student’s hands
  • Post-Secondary Education (PSE) Withdrawals: These are withdrawals of original contributions, and they can be received by the beneficiary tax free

If the funds are not fully used by the beneficiaries, the government grants generally need to be repaid, but there are options available for rest of the funds to be withdrawn or transferred to an RRSP of a subscriber under certain circumstances.


What Can You Hold in an RESP?

You can hold a wide range of investments in an RESP account:

- Cash
- Mutual funds
- Exchange-traded funds
- Bonds
- GICs
- Stocks
- Certain other permitted investments

The investments held within an RESP should reflect your financial goals, timeline for when the funds are needed, and risk tolerance. It is important to align your time horizon with when the beneficiary will be attending post-secondary schooling. Please contact us if you would like to discuss how to make the most of your RESP and ensure it aligns with your overall financial plan.

PREV ARTICLE
NEXT ARTICLE