RESP in Canada: How to Save for Education Smartly for Your Child’s Future

What is RESP and why use it for education savings in Canada?

The Registered Education Savings Plan (RESP) is a government-supported investment savings account that helps parents and guardians save for their child’s post-secondary education costs.

Key Benefits of RESP:

• Investment income and growth are tax-deferred until withdrawal.

• Receive direct government support through CESG and CLB programs.

• Flexible investment choices (GICs, mutual funds, ETFs, stocks, etc.).

With education costs rising, RESP is almost a “must-have” if you want to reduce financial pressure when your child goes to college or university.

3 Types of RESP You Should Know: Individual, Family & Group

• Individual RESP – For one beneficiary, no blood relation required.

• Family RESP – For multiple children in the same family; beneficiaries must be related by blood or legal adoption.

• Group RESP (Scholarship Plans) – Pooled savings with a set contribution schedule. Usually has higher fees and less flexibility.

Government Grants: CESG and CLB – Get Up to $9,200 Free

• CESG (Canada Education Savings Grant): The government adds 20% to the first $2,500 contributed each year (up to $500/year, $7,200 lifetime). Low-income families can get an extra 10–20% on the first $500 contributed.

• CLB (Canada Learning Bond): For low-income families. Receive $500 upon opening an RESP + $100/year until the child turns 15 (up to $2,000).

📌 By simply opening an RESP and meeting the requirements, you could receive up to $9,200 in free government support.

Contribution Limits & Account Duration

• Maximum: $50,000 per beneficiary (no annual limit, but to get the full CESG, contribute $2,500/year).

• Contributions can be made until the beneficiary turns 31.

• RESP can remain open for up to 35 years.

How to Withdraw Funds – And What to Do if Not Used for Education

When your child starts post-secondary education, withdraw funds as EAP (Educational Assistance Payments) – these are taxed at the student’s (usually low) income rate.

If not used for education:

• Change the beneficiary.

• Transfer up to $50,000 of investment earnings to an RRSP (if contribution room is available).

• Or withdraw as AIP (Accumulated Income Payments), which is subject to tax plus a 20% penalty.

Choosing the Right Institution & Investment Options for RESP

Where to open an RESP:

• Major banks (TD, RBC, Scotiabank…)

• Insurance companies & fund managers

• Online investment platforms

Investment options include:

• GICs: Safe, fixed interest.

• Mutual Funds / ETFs: Higher return potential, higher risk.

• Stocks: Flexible but highly volatile.

Deposit Insurance (CDIC) – How Is Your Money Protected?

If you open an RESP at a financial institution that’s a member of the Canada Deposit Insurance Corporation (CDIC), eligible deposits are insured up to $100,000 per beneficiary, protecting your capital against bank insolvency.

Conclusion

RESP is one of the most effective education savings tools in Canada. Starting early, contributing regularly, and maximizing government grants will significantly reduce your financial burden when your child enters higher education.

💬 Let the experts at TikiTax calculate the RESP that’s right for you: maximize CESG & CLB, choose the right institution, and invest wisely – start building your child’s financial future today.