Every year you delay opening an RESP is a year of free government grants you can’t get back. The sooner you start, the more the CESG compounds.
The Canada Education Savings Grant (CESG) is one of the few instances where the government gives you free money with no catch. Contribute $2,500 per year to your child’s RESP, and Ottawa adds $500. Do that every year from birth to age 17, and the government alone has contributed $7,200 toward your child’s education, before a single dollar of investment growth is counted.
A family RESP can have multiple beneficiaries (siblings). This gives you flexibility, if one child doesn’t pursue post-secondary education, the funds can be redirected to another child without penalty. Individual plans are locked to one beneficiary.
You have options. You can name a sibling as the new beneficiary, transfer up to $50,000 of accumulated income to your RRSP (if you have room), or close the account and repay the grants. Contributions themselves can always be returned to you tax-free.
Post-secondary education doesn’t only mean university. College, trade school, apprenticeships, and certain online programs also qualify. The definition is broader than most parents realize, which means fewer cases where the RESP goes unused.
How you invest inside the RESP matters as much as the contributions. With a long time horizon (15+ years for a newborn), a growth-oriented approach can significantly outperform a GIC or savings account strategy. As the child approaches university age, shifting to more conservative holdings makes sense.
Open an RESP as soon as your child is born. Every year you wait is a year of CESG grant room that doesn't carry back.
Contribute at least $2,500 per year to maximize the $500 annual CESG. You can contribute more, but grants are only on the first $2,500.
CRA automatically deposits the CESG into your RESP. Eligible low-income families receive additional grants through the Additional CESG and the Canada Learning Bond.
Contributions and grants grow inside the RESP tax-sheltered. No annual tax on investment income.
When your child enrolls in post-secondary education, withdrawals (called Educational Assistance Payments) are taxed in the student's hands, typically at a very low rate.
At minimum, $2,500 per year to capture the full $500 CESG grant. If you have the capacity to contribute more, you can, but additional contributions beyond $2,500 don’t attract additional grants. A lump sum early in the year maximizes the time your investments have to grow.
Anyone, parents, grandparents, aunts, uncles, family friends. The subscriber (account owner) opens the RESP and controls the account, but anyone can make contributions. Total contributions from all sources cannot exceed the $50,000 lifetime limit per beneficiary.
University, college (including community college), CEGEP, trade schools, technical institutes, and certain part-time programs all qualify. The institution must be a qualifying educational institution as defined by CRA. This covers a wide range of programs both in Canada and internationally.
The original contributions come back to you tax-free. The investment growth and government grants are taxed in the student’s hands when withdrawn as Educational Assistance Payments. Since most students have little to no other income, the tax rate is typically very low, often near zero.
Yes. Grandparents frequently open RESPs for grandchildren and are eligible for the same CESG grants. One nuance: if the grandparent is the subscriber and passes away before the RESP is used, the account transfers to the estate, which requires planning. Speaking with an advisor before setting this up is worthwhile.
