RESP (Registered Education Savings Plan)

How an RESP works

An RESP holds investments for a beneficiary, usually your child, until they start college, university, or another eligible post-secondary program. Contributions are made with after-tax dollars and are not tax-deductible, unlike an RRSP. In exchange, all growth inside the plan is tax-deferred, and when the money eventually comes out for school, most of it is taxed in the student's hands at little or no tax.

But the tax shelter is not the main event. The real draw of an RESP is free money: government grants that no TFSA or RRSP will ever pay you.

The CESG: a guaranteed 20% return

The Canada Education Savings Grant (CESG) matches 20% of your contributions, up to $500 of grant per child per year, which corresponds to $2,500 of contributions (as of July 2026). The lifetime CESG maximum is $7,200 per child. Contribute $2,500 a year for about 14 and a half years and you collect the full $7,200. No investment on earth guarantees an instant 20% return; the CESG does.

Missed years are not lost, but catch-up is limited: you can claim at most one missed year's worth of grant on top of the current year. In practice that means contributing $5,000 in one year attracts a maximum of $1,000 of CESG. A family that starts late can therefore double up each year until they are caught up, but cannot collect it all at once.

Modest-income families get an Additional CESG on the first $500 contributed each year: an extra 10% or 20% depending on family income (as of July 2026), on top of the basic 20%. Grants are paid until the end of the year the beneficiary turns 17, with one wrinkle: for 16 and 17 year olds, the plan must have a minimum history of prior contributions to keep receiving grants, so starting before age 15 matters.

Contribution limits

There is no annual contribution limit, but there is a lifetime cap of $50,000 per beneficiary (as of July 2026), counting contributions from all plans and all contributors combined. Note that only the first $2,500 a year earns the basic grant; contributions beyond that grow tax-deferred but attract no CESG. Overcontributions past $50,000 are penalized at 1% per month, so grandparents and parents opening separate plans for the same child should coordinate.

Taking money out: contributions vs. EAPs

RESP withdrawals come in two flavours. Your contributions come back tax-free, any time, to you or to the student. The grants and investment growth are paid out as Educational Assistance Payments (EAPs) once the beneficiary is enrolled in an eligible program. EAPs are taxable income for the student, but since most full-time students earn little, the basic personal amount and tuition credits usually reduce the tax on EAPs to little or nothing. Money that was never taxed going in, grew tax-free, and comes out nearly tax-free is a rare thing in Canadian tax law.

A common strategy is to draw EAPs first, since unused grant money may have to be repaid if the child stops studying, while contributions can always come out tax-free later.

If the child doesn't pursue education

Plans can stay open for decades, so a gap year or a slow start is not a crisis. If the beneficiary truly never attends an eligible program, your contributions come back to you tax-free, the government grants are returned to the government, and the accumulated growth is taxable in your hands plus a 20% penalty. You can avoid the penalty by rolling up to $50,000 of that growth into your RRSP, if you have the contribution room (as of July 2026). Family plans add flexibility here, since another child can use the funds.

Family plans, individual plans, and one warning

An individual plan has one beneficiary, who can be anyone, even yourself. A family plan can name multiple children (they must be related to you by blood or adoption) and lets grants-earning room and growth be shared among siblings, which is handy when one child studies and another doesn't.

One warning: avoid group plans, also called scholarship plan dealers, which are often sold door to door or around maternity wards. They lock you into rigid contribution schedules, charge high front-loaded fees you forfeit if you leave early, and restrict how the money is paid out. A self-directed individual or family RESP at a bank, discount brokerage, or robo-advisor does everything the group plan does, with lower costs and full flexibility.

Provincial top-ups: Québec and British Columbia

Québec adds the QESI (Quebec Education Savings Incentive), a refundable tax credit paid directly into the RESP: 10% of contributions up to $250 per child per year, with a lifetime maximum of $3,600 (as of July 2026). Combined with the CESG, a Québec family contributing $2,500 gets $750 of grants each year, an instant 30%.

British Columbia offers the BCTESG, a one-time grant of $1,200 with no contribution required. You must apply in the window between the child's 6th and 9th birthdays (as of July 2026), so BC parents should put a reminder in the calendar for the 6th birthday.