Post-secondary education is expensive. That’s why it’s important to consider the options you have to fund your child’s education. Starting to save now can help your child cover their tuition fees for college, university, or apprenticeship programs. So, let’s take a closer look at how a Registered Education Savings Plan (RESP) works, its different forms, and its pros and cons.
What is an RESP?
A registered education savings plan (RESP) allows you to save for university or other educational program. Supported by the Canadian government, this savings strategy encourages saving for your child’s education by leveraging tax-free earnings.
Three main parties are involved in opening and managing an RESP: a subscriber, a beneficiary, and a promoter. The subscriber is an individual who opens the account and makes regular contributions. The beneficiary is the child who may be attending post-secondary school someday. The promoter is a financial institution that offers RESP services.
Your contributions to a registered education savings plan accumulate tax-free and, in some cases, might be eligible for grants from the government, such as the Canada Education Savings Grant (CESG) and Canada Learning Bond (CLB). These incentives complement your contributions with extra resources. Qualified beneficiaries can receive up to $7,200 from the Canada Education Savings Grant and $2,000 from the Canada Learning Bond.
RESP contributions aren’t tax-deductible: the money you contribute will still count towards your taxable income. However, you won’t pay taxes on the contributions themselves. It’s critical to note that any earnings from your contributions will be taxed to your child once you withdraw the funds to pay for your child’s education.
How Do Registered Education Savings Plans Work?
An RESP lets Canadians save for their child’s education right from birth. To get started, contact a bank, credit union, or any other financial institution to register an account. The good news is any adult with a SIN can contribute: parents, guardians, relatives, or even a neighbour. However, while a child can have multiple RESPs, the total lifetime contribution is capped at $50,000.
The Canadian government then calculates a case-specific percentage and deposits it into the RESP. These extra funds are what’s known as a Canada Education Savings Grant. The amount added to your account depends on your family income. Households with lower incomes qualify for higher grants.
Once admitted to a post-secondary school, your child will be eligible to receive an educational assistance payment (EAP) for education-related expenses. The EAP can be considered the beneficiary’s income. The maximum EAP withdrawal amount as of 2025 is $28,881.00.
Note that the subscriber or contributor can decide to stop EAPs at any time. The beneficiary might also stop receiving EAPs if they don’t pursue post-secondary education. In this case, the subscriber can choose to obtain all RESP contributions back tax-free, but they’ll need to pay taxes on any RESP investment growth. They will also have to pay back any CESG funds.
Types of RESPs
Understanding your options is key when opening any new savings account. In the case of RESPs, they differ based on two factors: who can contribute to the account and who can use the savings to cover tuition costs for post-secondary education.
In general, Canadians can choose one of the following RESP options: individual (non-family) accounts, family plans, and group plans. Let’s see what strategy aligns with your goals.
Individual RESP
With an individual RESP, anyone can become a subscriber for a single beneficiary. That is, any Canadian adult with a social insurance number can set up this savings plan. The main criterion that sets this type of registered education savings plan apart from other alternatives is that only one beneficiary can be named under this plan.
One of the benefits of an individual RESP is that you don’t need to be related to the beneficiary. For example, you can open an individual account for your cousin as well as a neighbour’s child. You can also consider opening an individual RESP for yourself or another adult.
Another benefit is that the subscriber can make contributions on a flexible basis until the plan reaches its total contribution limit. Plus, the qualified beneficiary can still receive a Canada Education Savings Grant and Canada Learning Bond.
Any unused portions of the grant (not your contributions) must be returned to the government upon closing the account. This rule also applies to family RESPs.
Family RESP
A family RESP is the perfect fit for larger families with two or more children.
However, there are several factors that determine your eligibility for this type of RESP. First, all beneficiaries must be related by blood or adoption to the subscriber. This means you can open a shared account for your children, grandchildren, siblings, etc.
A subscriber can add or remove beneficiaries over the RESP’s lifetime.
A family savings plan also qualifies for federal grants, allowing each beneficiary to receive up to a lifetime maximum of $7,200.
Group RESP
A Group RESP is a pooled savings plan offered by scholarship or group plan dealers rather than traditional financial institutions. These plans require multiple subscribers to contribute to a shared fund, which is then managed according to strict guidelines.
A Group RESP can provide structured savings and investment growth, but it also comes with various restrictions and fees. Subscribers must follow a set contribution schedule, and there may be penalties for missed payments or early withdrawals.
The only feature this option shares with an individual RESP is its eligibility requirements, where the single beneficiary doesn't need to be related to the subscriber.
In general, group RESPs are more complex and restrictive. They also tend to have higher fees and require a subscriber to make a set minimum deposit upon opening an account.
Unlike individual and family RESPs, a group registered education savings plan offers less flexibility with contribution payments. Subscribers must make their contributions according to a fixed payment schedule, with a lifetime contribution limit of $50,000.
If you’re thinking about opening a group RESP, keep in mind that these plans also tend to have extra rules regarding accessing the education assistance payment. That is, beneficiaries might be restricted in how much and how often they can use the savings.
Pros of an RESP
A registered education savings plan is a great way to save for your child’s (or another beneficiary’s) education. Here are some of the benefits worth exploring:
Government support. Contributions to a registered education savings plan qualify for the Canada Education Savings Grant (CESG) and Canada Learning Bond. For example, you can receive a maximum CESG worth $7,200. Based on your income, beneficiaries can be eligible for additional grants.
Tax-free accumulation of funds. Contributions are made with after-tax income. Only the investment earnings and grant amounts are taxed when the beneficiary withdraws the funds.
Flexibility and savings term. With an individual RESP, you can contribute on a flexible basis until the plan reaches the total lifetime contribution limit. Plus, RESPs can be open for 35 years. If your child doesn’t go to school, you can still get your contributions back tax-free, or the income can be transferred to your RRSP.
Cons of an RESP
Before committing to an RESP, it’s also important to consider its potential limitations. The most common drawbacks of this savings strategy are:
Income taxes. Students might be required to pay taxes on their educational assistance payments.
Penalty for exceeding lifetime contribution limit. The total lifetime contribution limit per beneficiary is $50,000. If you exceed it, you’ll be charged a 1%-tax on the excess contribution each month until the excess funds are withdrawn.
Restrictive rules. With group RESPs, beneficiaries might be limited in how much and how often they can use the savings. Plus, this type of RESP comes with a minimum deposit a subscriber must make when opening an account. Individual and group savings plans are also restricted to only one beneficiary.
What If a Registered Education Savings Plan Isn’t Used?
When the beneficiary decides not to pursue post-secondary education right after high school, a few scenarios are possible.
First, consider leaving the account untouched for a few years should the beneficiary decide to pursue a degree. Remember that an RESP account can remain open for up to 35 years.
Changing the beneficiary might be another way to go. For individual and group RESPs, you might be able to assign the plan to another beneficiary. With a family RESP, you could distribute the resources among the members of the plan still seeking post-secondary education.
You could move your contributions to your registered retirement savings plan (RRSP) as long as the terms and conditions allow for the transfer. In general, an RESP must be open for at least a decade before you can transfer funds to your RRSP. Additionally, you can transfer your funds to a RDSP (Registered Disability Savings Plan), but the beneficiary must be the same.
Finally, you can close an RESP if the beneficiary is 21 or older. You won’t be charged taxes on the contributions themselves, but you’ll have to pay taxes on any interest earned. Plus, all the government grants must be returned.
Withdrawal Terms
Before withdrawing your savings from an RESP account, consider the terms and conditions specific to your contract. A few basic rules apply to all RESP withdrawals.
First, you’ll have to contact your RESP service provider to inform them about your decision to take the funds out of your account. Please note that the subscriber must send valid documentation verifying the student’s enrollment in an educational program at a recognized academic institution. Once the enrollment is confirmed, your RESP service provider will issue the funds.
If the beneficiary is enrolled in an eligible post-secondary program, they can receive Educational Assistance Payments (EAPs), which consist of investment earnings and government grants accumulated within the RESP. EAPs are taxable income for the student, though their tax liability is often minimal due to lower student income. The bank or credit union that manages your RESP account will issue a T4A tax form to the beneficiary.
An initial EAP of up to $8,000 can be withdrawn from an RESP within the first 13 weeks of enrollment in a full-time program at a recognized academic institution. After this period, students can access EAP funds without any withdrawal limits (unless it is from a Group RESP).
Second, the subscriber can withdraw their original contributions from an RESP at any time. These withdrawals, known as a refund of contributions, are not taxable since the contributions were made with after-tax dollars.
Conclusion
Post-secondary education is expensive. On average, undergraduate domestic students pay approximately $7,360 per year in tuition fees alone. An RESP is a savings plan created to help you save for your child’s education. The primary benefit of an RESP is the government grants that boost your savings. In addition, your savings grow tax-free.
Need help getting started? Contact us for guidance on maximizing your education savings. Our experts are happy to answer all your questions.
FAQs
How Do I Open an RESP?
First, reach out to a financial institution where you’d like to open an account. Then, gather the necessary documents to register an RESP. Typically, all you’ll need is you and your beneficiaries’ Social Insurance Numbers. Next, decide on the type of RESP that suits your needs: individual, family, or group plan.
Why Should I Choose an RESP?
It might be challenging to afford post-secondary education. Starting to save as soon as possible can help your child cover their tuition fees for college, university, or any other training program. With a Registered Education Savings Plan (RESP), you can qualify for government grants to complement your savings.
How Much Should I Contribute to an RESP?
Your contributions depend on your goals and current income. Individual and family accounts allow flexible payments, while group plans have stricter requirements, including a minimum initial deposit. There’s no minimum contribution requirement, but if you want to receive the CESG, contributing regularly can help maximize these government benefits.