Registered Education Savings Plan (RESP): Your Guide to Saving for Post-Secondary Education

A Registered Education Savings Plan (RESP) is a Canadian government-registered savings tool designed to help families and individuals save for the cost of post-secondary education — including university, college, trade schools, and vocational programs. It’s not a retirement account; instead, it’s dedicated to helping future students cover educational costs with the advantage of tax-sheltered growth and government incentives.

What Is an RESP?

An RESP is a contract between a subscriber (usually a parent, grandparent, or other adult) and a promoter (a financial institution such as a bank or investment firm). The subscriber makes contributions that grow tax-sheltered inside the plan, and the promoter agrees to pay education support — called Educational Assistance Payments (EAPs) — to one or more named beneficiaries (the future students).

Family plans let you name multiple beneficiaries (e.g., siblings), while other plans are typically single-beneficiary.

How an RESP Works

Here’s a simple overview of the RESP process:

1. Open an RESP contract with a financial institution and name the beneficiary(ies).
   
   
2. Make contributions to the plan (these are not tax-deductible).
   
   
3. Government grants — such as the Canada Education Savings Grant (CESG) and Canada Learning Bond (CLB) — are added to help your savings grow faster (if the beneficiary is eligible).
   
   
4. Money inside the RESP grows tax-free until it’s paid out.
   
   
5. When the beneficiary goes to post-secondary school, the plan pays out EAPs to help cover qualified education costs.
   
   

Contributions: What You Need to Know

• Contributions to an RESP do not reduce your taxable income — unlike RRSPs.
  
  
• There is a lifetime limit on how much can be contributed to an RESP for each beneficiary under the Income Tax Act, and annual contribution rules apply.
  
  
• To contribute to an RESP for a beneficiary, the beneficiary’s Social Insurance Number (SIN) and Canadian residency are normally required before the contribution is made.
  
  
• Contributions can be made until the end of the year that includes the 31st anniversary of the plan, and the RESP must generally be completed by the year that includes the 35th anniversary of the plan.
  
  

Government Grants and Bonds

When you contribute to an RESP, you may be eligible for valuable government-funded incentives:

Canada Education Savings Grant (CESG)

The government contributes a percentage of RESP contributions up to certain limits each year, helping your savings grow faster.

Canada Learning Bond (CLB)

For lower-income families, the CLB provides additional contributions to the RESP without requiring personal contributions.

There are also provincial education savings incentives in certain provinces which may add extra benefits.

Withdrawals: Getting Money Out for School

Educational Assistance Payments (EAPs)

Once the beneficiary is enrolled in a qualifying post-secondary program, the RESP can pay out EAPs. These payments include:

• government grant amounts
  
  
• earnings on investments in the RESP
  
  

EAPs are taxable in the student’s hands (often at a lower rate because students usually have lower income).

Refund of Contributions

Your original contributions can be returned to you at almost any time tax-free — provided the plan conditions are met.

Transfers and Rollovers

You can transfer RESP funds between plans — typically without tax — as long as the beneficiaries are the same or meet specific criteria. RESP savings may also be rolled over to a Registered Disability Savings Plan (RDSP) under certain conditions (for beneficiaries with disabilities) without immediate tax consequences.

What Happens if the Child Doesn’t Go to School?

If a beneficiary does not pursue post-secondary education, there are a few options:

• Transfer the RESP to another eligible beneficiary.
  
  
• Withdraw contributions tax-free, but government grants may need to be repaid.
  
  
• Withdraw the investment earnings (typically taxable and possibly subject to penalties).
  
  

Important Considerations

RESPs are powerful tools because:

• you benefit from tax-sheltered growth,
  
  
• the Canadian government adds grants and bonds, and
  
  
• the plan is designed to support real educational expenses.
  
  

However, contributions are not tax-deductible, and conditions apply to government incentives and withdrawals. Careful planning ensures you get the most out of the account for your child’s future education.