RESPs Explained: How the Registered Education Savings Plan Works in Canada

Thinking about saving for your child’s future?

In Canada, one of the best ways to do that is through an RESP (the Registered Education Savings Plan).

• But how does it actually work?

• Who can open one?

• And what happens when your child finally goes to college or university?

Let’s break it all down in plain English so you can understand exactly how to use an RESP to set your kid up for success.

🎓 What Is an RESP?

An RESP is a special savings account designed to help parents, grandparents, or guardians save for a child’s post-secondary education.

Here’s the magic part:

• You contribute money

• It grows tax-free while inside the account

• And the government chips in with free money through grants

That means your savings grow faster than they would in a regular account.

💰 The Government Grant: CESG

The main government incentive is called the Canada Education Savings Grant (CESG).

Here’s how it works:

• The government adds 20% on top of what you contribute (up to $500 per year)

• Each child can earn up to $7,200 total from this grant

👉 Example:
If you contribute $2,500 in a year, the government gives you $500, an instant 20% return before your investments even start growing.

If you skip a year, don’t worry, you can catch up later (the max grant per year is $1,000).

Grants are available until your child turns 17.

💸 The Income-Based Bonus: Canada Learning Bond (CLB)

Here’s something a lot of parents don’t know about.
If your family has a low to moderate income, your child might qualify for the Canada Learning Bond (CLB), extra money from the government even if you don’t contribute a cent.

Here’s what you can get:

• Up to $2,000 total per child

• No contributions required

• You just need to open an RESP and meet the income eligibility

The government starts with a $500 deposit, then adds $100 each year your child stays eligible until age 15.

So even if you’re not ready to contribute, you can still open the RESP and let that bonus money build over time.

🧒 Who Can Open and Contribute to an RESP

• Anyone can open an RESP for a child (parents, grandparents, or even family friends).

• The child must have a Social Insurance Number (SIN).

• The total lifetime contribution limit is $50,000 per child (no annual limit).

📈 How the Money Grows

Inside the RESP, you can invest your money just like in a TFSA or RRSP.
That means you can hold:

• ETFs

• Mutual funds

• GICs

• or individual stocks

Your investments grow tax-free while in the account.
Many parents start with growth-focused investments while their child is young, then switch to safer ones (like bonds or GICs) as college approaches.

🎓 When Your Child Goes to School

When your child enrolls in a qualified post-secondary program (college, university, or trade school) you can start making withdrawals.

Here’s how it works:

• Your contributions come out tax-free.

• The grants and investment earnings are taxed in your child’s name, and since most students have little to no income, they often pay zero tax.

You’ll just need to show proof of enrollment to your RESP provider before withdrawing.

⏳ If Your Child Doesn’t Go to School

All good, you still have options:

• You have up to 35 years to use the RESP funds.

• You can transfer the money to another child’s RESP.

• Or move up to $50,000 of contributions into your RRSP (if you have room).

Just keep in mind: the government grants must be returned if the child doesn’t attend post-secondary education.

⚠️ Important Rules to Remember

✅ Lifetime contribution limit: $50,000 per child
✅ Maximum government grant: $7,200 per child (plus CLB if eligible)
✅ RESP funds must be used for education… or grants get repaid
✅ Plan can stay open for 35 years, though it may be extended to 40 years for a beneficiary eligible for the disability tax credit

✅ The Bottom Line

Here’s your quick recap:

• RESP = tax-sheltered account for education savings

• Government adds up to $7,200 (plus up to $2,000 CLB for eligible families)

• Contributions come out tax-free, and investment growth is lightly taxed in your child’s hands

If you’re a parent (or planning to be one), the RESP is one of the best investments you can make for your child’s future.

Want a simple, visual breakdown of RESP rules, grants, and withdrawal tips?
Click here to download my Canadian Investment guide — it’s designed to help Canadian parents start strong.