The RESP: Free Government Money for Your Child's Education

A Registered Education Savings Plan (RESP) is a tax-sheltered savings account designed to help Canadians save for a child's post-secondary education. Money grows tax-sheltered inside the account, and the federal government adds grants on top — essentially free money just for contributing. When your child withdraws the funds for school, the growth and grants are taxed in their hands (usually at a very low rate, since students typically earn little income).

You can open an RESP for any child who is a Canadian resident with a Social Insurance Number (SIN) — your own child, grandchild, niece or nephew, or even a friend's child. There is no annual contribution limit, but the lifetime contribution limit is $50,000 per beneficiary across all RESPs. Contributions are not tax-deductible (unlike an RRSP), but the growth is tax-sheltered until withdrawn.

The biggest advantage of an RESP isn't the tax-sheltered growth — it's the government grants. These are deposits the federal (and some provincial) governments make directly into the RESP, just because you contributed. You cannot get these grants in a TFSA or non-registered account.

Canada Education Savings Grant (CESG) — Available to All Canadians

• Basic CESG: 20% on the first $2,500 contributed per year = up to $500/year per child.
• Lifetime maximum: $7,200 per beneficiary across all RESPs.
• Additional CESG for lower-income families: An extra 10% or 20% on the first $500 contributed, worth up to $100/year. Families with net income under $55,867 (2026) get an extra 20%; those up to $111,733 get an extra 10%.
• Unused CESG room carries forward: If you contribute less than $2,500 in a year, you can catch up in future years — but you can only receive a maximum of $1,000 CESG in any single year (using both the current year and one year of carry-forward).
• The child must be under 18 to receive the grant, and must be a Canadian resident.

Canada Learning Bond (CLB) — For Lower-Income Families

• An initial $500 deposit when the RESP is opened, plus $100 for each year of eligibility until age 15.
• No RESP contributions are required to receive the CLB — it's free money just for opening the account.
• Lifetime maximum: $2,000 per child.
• Eligible if the child's family receives the National Child Benefit Supplement or the family's income falls under certain thresholds.
• The child must have been born on or after January 1, 2004.

Provincial Grants (Additional Free Money in Some Provinces)

There are three types of RESPs, and choosing the right one matters — especially if you're considering opening one at a bank, credit union, or independent dealer.

To maximize the CESG, you want to contribute at least $2,500 per year per child. This earns the full $500 annual grant. Over 14 years (from birth to age 14), that's $35,000 in contributions + $7,000 in basic CESG — before any investment growth.

You don't have to contribute $2,500 in one shot. Many families automate a monthly contribution of about $208/month to hit the $2,500 target by year-end. You can adjust or pause contributions at any time with a self-directed RESP.

• To max the CESG each year: contribute $2,500 per year per child (any time before December 31).
• There is no annual contribution limit — you can contribute more than $2,500, but the government only grants on the first $2,500.
• Unused CESG grant room carries forward. If you contributed $0 in a year, you carry forward $2,500 of grant-eligible room. The catch: you can only receive a maximum of $1,000 in CESG in a single year, so you can only catch up 2 years at a time.
• The lifetime contribution limit is $50,000 per beneficiary across all RESPs. Over-contributions attract a 1% monthly penalty tax on the excess.
• Contributions can be made until the end of the 31st year after the RESP was opened. Grants stop at the end of the year the beneficiary turns 17 (and 15 for the CLB).

An RESP is just an account — what you hold inside it determines your returns. At a self-directed brokerage or bank, you can hold the same investments you would in a TFSA or RRSP: stocks, ETFs, index funds, GICs, and mutual funds.

Recommended Approach: Age-Based Investing

1. 1Early years (0–12): Invest aggressively — 80–100% in broad market ETFs. You have a long time horizon and can ride out market swings. A simple all-in-one ETF like XEQT (iShares Core Equity ETF), VEQT (Vanguard All-Equity), or XGRO (80/20 growth) works well and requires no rebalancing.
2. 2Middle years (12–15): Gradually reduce risk — shift toward a 60/40 growth/bond mix. A fund like XGRO or VGRO (Vanguard Growth ETF) is appropriate.
3. 3Final years (15–18): Shift toward capital preservation. Move into GICs, bond ETFs, or money market funds so a market crash just before school doesn't wipe out years of savings. The grants and growth should be protected, not at risk, as tuition payments approach.

Many banks offer "managed" RESP portfolios that automatically adjust risk as the child ages — these are convenient but often carry higher MER fees (0.5–1.5%) compared to DIY ETF portfolios (under 0.25%). If you're comfortable managing the account yourself, Questrade or Wealthsimple Trade both offer commission-free ETF purchases and accept RESPs.

When your child starts qualifying post-secondary education — university, college, trade school, or many other programs — they can start receiving payments from the RESP. There are two types of withdrawals, and understanding the difference matters for tax planning.

Educational Assistance Payments (EAPs)

EAPs include the government grants (CESG, CLB, provincial grants) and any investment growth on those grants and on your contributions. EAPs are taxable income in the student's hands — not yours. Since most students have low income while in school, they typically pay little to no tax on EAPs after accounting for the basic personal amount (~$16,452 federal for 2026) and tuition tax credits.

Refund of Contributions

Your original contributions (the money you put in) come back to you or to the student completely tax-free, at any time. This is similar to a TFSA withdrawal — no tax because you contributed after-tax money.

This is the most common concern people have about opening an RESP — and it's more manageable than most people think. You have several options:

1. 1Transfer to a sibling — if you have another child, you can change the beneficiary to that child with no penalty. The grants follow the new beneficiary (subject to their own CESG limits).
2. 2Wait up to 36 years — the RESP can stay open for up to 36 years. If your child decides to go back to school later in life, the money is still there.
3. 3Transfer growth to your RRSP — you can transfer up to $50,000 of investment growth (not grants) to your own RRSP if you have contribution room, without tax at the time of transfer. The RESP must have been open for at least 10 years and the beneficiary must be at least 21. This is a significant potential benefit for patient savers.
4. 4Take an Accumulated Income Payment (AIP) — withdraw the earnings from the account, but this triggers regular income tax plus a 20% penalty tax on the amount. The penalty is waived only if you transfer to an RRSP.
5. 5Repay the grants — government grants (CESG, CLB) must be repaid if the RESP closes without qualifying education. Your original contributions are always returned to you tax-free.

In practice, the risk of "wasted" RESP money is low. Post-secondary education in Canada includes trades school, private colleges, online programs, and some international schools. Most young Canadians attend some form of qualifying education at some point — and if they don't, the RRSP transfer option is a powerful fallback for parents with contribution room.

Opening an RESP takes about 15 minutes online. Here's what you need and where to go.

1. 1Get the child's SIN — apply online at Service Canada. You'll need their birth certificate. Apply as soon as possible after birth.
2. 2Gather your own SIN and personal information.
3. 3Choose where to open the account. Best options: Questrade (low-cost, self-directed ETF investing), Wealthsimple (user-friendly, commission-free ETF purchases), or your bank (convenient but often higher MER on managed portfolios).
4. 4Apply for government grants — most RESP providers automatically submit CESG applications on your behalf when you open the account. Check with your provider to confirm.
5. 5If you're in BC, separately apply for the BCTESG when the child is 6–9 years old through your RESP provider.
6. 6Set up automatic monthly contributions — even $50/month is a meaningful start. Increase over time as your income grows.
7. 7Review your investment selection annually and shift to a more conservative allocation as the child approaches school age.