RESP Frequently Asked Questions: Everything Canadian Parents Need to Know

If you’re planning for your child’s future education, you’ve likely heard of the Registered Education Savings Plan (RESP). This government-supported savings plan can help make college or university more affordable while offering valuable grants and tax benefits. To help you understand how RESPs work and how they can benefit your family, here are the most frequently asked questions answered.

WHAT IS AN RESP?

An RESP, or Registered Education Savings Plan, is a special investment account created by the federal government as a tax-effective way to help families save for a child’s post-secondary education. The key benefit of an RESP is that contributions grow tax-free, and the government also helps by providing grants to boost your savings. It’s one of the smartest ways to financially prepare for your child’s future.

HOW DOES RESP WORK?

When you open an RESP for your child (called the beneficiary), you can begin making contributions to the account. These contributions are not tax-deductible, but they grow tax-free while invested. The government also contributes to the RESP through programs like the Canada Education Savings Grant (CESG) and the Canada Learning Bond (CLB). When your child enrolls in an eligible post-secondary program, the money can be withdrawn to help cover education costs.

WHAT DO I NEED TO OPEN AN RESP? 

To open an RESP, you’ll need a Social Insurance Number (SIN) for yourself and for your child. You'll also need to choose a financial institution or advisor to help you open the account. Once it’s open, you can start contributing at your own pace—whether that’s monthly, annually, or as you’re able.

HOW MUCH CAN I CONTRIBUTE TO AN RESP?

There’s no annual contribution limit, but there is a lifetime maximum of $50,000 per beneficiary. You can contribute the full amount at once or spread it out over time. However, only $36,000 would qualify for the 20% CESG grant before reaching the lifetime grant limit of $7,200. Note that the $50,000 limit is per child, not per plan While contributions are not tax-deductible, the savings grow tax-free and may qualify for government grants.

CAN I MAKE A LARGE LUMP-SUM CONTRIBUTIONS TO AN RESP?  

You can absolutely make a large lump-sum contribution if you have the means to do so and provided that you are still below the lifetime contribution limit of $50,000.  However, it's important to note that the Canada Education Savings Grant (CESG) only applies to the first $2,500 you contribute each year. If you contribute more than that, the extra funds won't receive a matching grant for that year, though you can catch up on unused grant room in future years.

WHAT CAN I INVEST IN WITHIN RESP?  

RESPs offer a variety of investment options, depending on your provider. These may include including mutual funds, cash, bonds and stocks. The money you invest has the potential to grow tax-free, and you can choose a portfolio that matches your goals and risk tolerance.

WHAT EDUCATIONAL PROGRAMS QUALIFY FOR RESP WITHDRAWALS?  

RESP funds can be used for full-time or part-time post-secondary education programs at colleges, universities, CEGEPs, trade schools, and technical institutions. Some international programs also qualify, as long as the school is on the government’s list of designated institutions and the program meets the minimum duration and structure requirements.  See the Government of Canada’s website for more details.

IF I HAVE SEVERAL CHILDREN, DO I HAVE TO SET UP AN RESP ACCOUNT FOR EACH CHILD?

You don’t necessarily need a separate RESP for each child. If your children are related to you by blood or adoption, you can open a Family RESP. This allows you to save in one account and share the funds among your children. If your children aren’t related to you (for example, if you're saving for a niece or a friend’s child), then you would need to open individual RESPs for each of them.

IS THERE A PENALTY FOR OVER-CONTRIBUTING TO AN RESP?

Yes. If you contribute more than the $50,000 lifetime limit per child, you will be charged a 1% tax per month on the excess amount until it is withdrawn. It's important to track your contributions carefully, especially if multiple people are contributing to the same child’s RESP across different plans.

CAN I MAKE AN AUTOMATIC CONTRIBUTION TO AN RESP?

Yes. Many RESP providers allow you to set up automatic monthly or bi-weekly contributions. This can help you stay consistent with your savings plan and make it easier to reach your goals without having to think about it every month.

IF I MISS A YEAR OF CONTRIBUTING, CAN I STILL GET THE CESG?

Yes, unclaimed CESG entitlements can be carried forward, but you can only catch up one year at a time. You can carry forward unused CESG room and receive up to $1,000 in CESG per year by contributing $5,000 in a single year. This is a great way to catch up if you weren’t able to contribute in earlier years.

HOW DO I FIND OUT MY REMAINING RESP CONTRIBUTION?

You can call Employment and Social Development Canada toll-free at 1-888-276-3624 to find out how much lifetime RESP contribution room remains for your child. Keeping track of your contributions is especially important if multiple RESPs have been opened for the same child.

HOW DO I GET THE GOVERNMENT GRANTS?

When you complete the RESP application, your financial advisor will help you fill out and submit the Canada Education Savings Grant (CESG) application forms as part of the account opening process. Your advisor can also help you apply for additional grants for modest-income families — the Additional CESG and the Canada Learning Bond. Your applications are submitted to Employment and Social Development Canada for processing and the grants are paid directly to your RESP account.

HOW MUCH DOES THE GOVERNMENT CONTRIBUTE TO AN RESP?

The federal government matches 20% of your annual contributions through the CESG, up to a maximum of $500 per year and $7,200 per child over the life of the plan. Families with lower incomes may qualify for a higher matching rate on the first $500 contributed. The Canada Learning Bond (CLB) provides up to $2,000 for children from low-income families, even if you don’t contribute anything to the RESP.

ARE THERE ANY ADDITIONAL PROVINCIAL GRANTS?

Yes, some provinces offer their own education savings incentives. For example, British Columbia provides the BC Training and Education Savings Grant (BCTESG), which gives eligible children a one-time payment of $1,200. Quebec also offers its own grant—the Quebec Education Savings Incentive (QESI)—which adds a provincial grant on top of the federal CESG.

WHEN FUNDS ARE WITHDRAWN FROM AN RESP, HOW IS THE MONEY TAXED?

There are two types of withdrawals: Educational Assistance Payments (EAPs) and post-secondary education (PSE). EAPs include government grants and investment earnings and are taxable in the student’s hands, who likely pays little or no tax due to their low income. The PSE, which is the money you contributed, is not taxed when withdrawn.

WHAT HAPPENS TO THE RESP IF IT IS NOT USED BECAUSE MY CHILD DID NOT PURSUE POST SECONDARY EDUCATION?

If your child decides not to continue their education, you still have options. You can transfer the RESP to another eligible child. You can make a transfer without any penalty when there’s a common beneficiary under the transferring plan and the plan receiving the transfer; and the beneficiary is under 21 and a sibling of the original beneficiary.

Another option is to withdraw your original contributions, you will not be taxed on the amount you contributed to the RESP but, you will have to pay taxes on the money that you earned in the plan as interest. It will be taxed at your regular income tax level, plus an additional 20%.

Or you can transfer up to $50,000 of your contributions to (if you have room) This option will help avoid taking the tax hit on the money you earned in your plan as interest.  To make a transfer: the RESP must have been in effect for at least 10 years, and all beneficiaries must be at least 21, and not seeking higher education.

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Your financial institution will return grants and their earnings to the Government of Canada.

RESPs are a powerful savings tool that help Canadian families plan for one of the biggest investments in their child’s future - education. With tax-free growth, government contributions, and flexible withdrawal options, an RESP can ease the financial burden of college or university.

If you’re ready to start an RESP or want to review your current plan, I’d love to help.

Reach out today for a complimentary consultation and let's build a plan that fits your goals and your budget.

This article provides general information only and should not be considered legal, financial, or professional advice. You should consult a qualified professional for guidance tailored to your specific situation. While the information presented is believed to be accurate and up to date, its completeness and reliability are not guaranteed. The views expressed are those of the author(s) as of the date of publication and may change without notice. No endorsement of any third parties, their advice, opinions, products, or services is given or implied by Upsurge Financial Services Inc. or its affiliates.