This post is for educational purposes only. PlanSmartFi is not a financial advisor. Always do your own research and consider speaking with a licensed financial professional before making any financial decisions.
RESP in Canada: How It Works and How to Open One
Why RESP in Canada? Post-secondary education in Canada is expensive and getting more so. A Registered Education Savings Plan (RESP) is one of the most effective tools available to Canadian families who want to start saving for a child’s education, largely because the federal government contributes money on top of whatever you save.
This post explains how an RESP works, what grants are available, what types of plans exist, and what the process of opening one looks like.
What Is an RESP?
An RESP is a government-registered savings account designed specifically for post-secondary education. Contributions are not tax-deductible, but the money inside grows tax-sheltered until it is withdrawn. When the funds are eventually paid out to the student, they are taxed in the student’s hands, which typically means little to no tax owing since most students have low income.
Anyone can open an RESP for a child, including parents, grandparents, other relatives, and family friends. The person who opens the account is called the subscriber, and the child the account is opened for is the beneficiary.
The lifetime contribution limit per beneficiary is $50,000. There is no annual contribution limit, but government grant eligibility is based on annual contribution amounts, which matters when planning how much to put in each year.
The Canada Education Savings Grant (CESG)
The CESG is the primary reason many Canadian families open an RESP. The federal government matches 20% of your annual RESP contributions, up to a maximum grant of $500 per year per beneficiary. To receive the full $500 grant in a year, you need to contribute $2,500.
CESG at a glance
Government match: 20% of annual contributions
Maximum grant per year: $500 (on $2,500 contributed)
Lifetime maximum per beneficiary: $7,200
Available until the end of the calendar year the child turns 17
Catch-up room: Yes. Unused grant room carries forward and can be used in a future year, up to a maximum of $1,000 in any single year
If you do not contribute enough in a given year to receive the full $500, unused CESG room carries forward. You can catch up in a future year, though the maximum grant in any single year is $1,000 (which requires a $5,000 contribution that year).
One important detail: to qualify for the CESG at age 16 or 17, at least $2,000 must have been contributed to the RESP before the end of the calendar year the child turns 15. Starting early avoids this complication entirely.
Additional CESG for Lower and Middle-Income Families
Families with lower or middle adjusted family net income may qualify for an additional CESG on top of the standard 20% match. This additional amount is applied to the first $500 contributed each year and varies based on income. Eligibility thresholds are subject to change, so it is worth checking the current figures directly at canada.ca.
The Canada Learning Bond (CLB)
The Canada Learning Bond is a federal grant specifically for children from lower-income families. Unlike the CESG, no contributions are required to receive it. Simply opening an RESP and applying is enough.
CLB at a glance
Initial payment: $500 in the first year of eligibility
Ongoing payments: $100 per year for each subsequent eligible year up to age 15
Lifetime maximum: $2,000 per beneficiary
Eligibility: based on adjusted family net income and number of children
Can be applied for retroactively up to the day before the child turns 18
Eligibility is based on the primary caregiver’s adjusted family income and the number of children in the family. Thresholds are updated periodically, so checking the current income limits at canada.ca is the most reliable approach.
The CLB is one of the most underused government benefits in Canada. Millions of eligible children never receive it, often because their families are not aware it exists or because no RESP has been opened. If you think you may qualify, it is worth looking into regardless of whether you plan to contribute to the RESP yourself.
Types of RESP Plans
| Plan type | Who it is for | Key consideration |
|---|---|---|
| Individual plan | One named beneficiary; can be any age, any relationship to subscriber | Most flexible; can be transferred to another beneficiary if needed |
| Family plan | Multiple beneficiaries who must all be siblings | Unused funds can be shared among siblings; additional CESG and CLB require all beneficiaries to be siblings |
| Group (pooled) plan | One beneficiary; pooled with other investors by age group | Stricter rules, less flexibility; contributions and withdrawal timing often fixed by the plan |
Individual and family plans are generally more flexible than group plans. Group plans, sometimes sold by scholarship plan dealers, have historically come with more restrictions around contribution schedules, fees, and what happens if circumstances change. Reading the terms carefully before enrolling in any plan is worthwhile.
What Can Be Held Inside an RESP?
An RESP is an account structure, not an investment itself. Inside an RESP, you can typically hold:
- Cash or high-interest savings deposits
- GICs (Guaranteed Investment Certificates)
- Mutual funds
- Exchange-traded funds (ETFs)
- Individual stocks and bonds (depending on the provider)
The investment options available depend on where you open the RESP. Banks typically offer mutual funds and GICs. Self-directed brokerage accounts offer a wider range including ETFs and individual securities. Many Canadian families use a mix of growth-oriented investments in the early years and shift toward lower-risk options as the child approaches post-secondary age.
What Happens If the Child Does Not Go to Post-Secondary?
This is one of the most common concerns parents raise, and the situation is more manageable than many people expect.
If the beneficiary does not pursue post-secondary education, several options are generally available:
- Wait. The RESP can remain open for up to 35 years. Some students start post-secondary later than expected.
- Transfer to another beneficiary. In a family plan, unused funds can be directed to a sibling. In an individual plan, you may be able to change the beneficiary to another child.
- Transfer to your RRSP. If you have available RRSP contribution room, up to $50,000 of the accumulated income in the RESP may be transferable to your RRSP, subject to conditions. This is called an Accumulated Income Payment (AIP) transfer.
- Withdraw the funds. Your original contributions can be withdrawn at any time with no tax consequences. The government grants (CESG, CLB) must be returned to the government. The accumulated income is subject to your regular income tax rate plus an additional 20% penalty tax.
The worst-case outcome is generally getting your contributions back and losing the grant money if no eligible education occurs. For most families, the CESG match alone makes the RESP worth opening even with that scenario in mind.
How to Open an RESP in Canada
The general process is straightforward:
- Gather what you need. You will need your Social Insurance Number (SIN), the child’s SIN, and proof of the child’s birth. If the child does not yet have a SIN, applying for one at a Service Canada office or online is the first step.
- Choose a provider. RESPs can be opened at banks, credit unions, investment dealers, and online brokerages. Popular options among Canadians include RBC, TD, and Questrade, though many other providers offer RESPs. Consider what investment options you want access to, what fees apply, and whether the provider supports CESG and CLB applications. Not all providers offer the CLB, so confirm this if it is relevant to your situation.
- Open the account and apply for grants. When you open the RESP, you will typically complete the CESG and CLB application forms at the same time. Most providers handle the grant application automatically once the forms are on file.
- Make your first contribution. Even a small initial contribution is enough to trigger the CESG application process. If you qualify for the CLB, no contribution is required at all.
- Set up a recurring contribution. Contributing $208 per month ($2,500 per year) is a common benchmark that many families use to target the maximum annual CESG of $500.
Frequently Asked Questions About RESPs in Canada
When should I open an RESP?
As early as possible. The CESG is available from birth and grant room accumulates every year. Opening an RESP in the first year of a child’s life gives you the maximum number of years to collect the annual grant and benefit from compound growth on both your contributions and the government money.
Can grandparents or other relatives open an RESP?
Yes. Anyone can open an individual RESP for a child as the subscriber, regardless of their relationship to the beneficiary. Grandparents, aunts, uncles, and family friends can all open and contribute to an RESP. For a family plan, the subscriber must generally be a parent or grandparent of all the beneficiaries listed.
What is better for an RESP: ETFs or GICs?
It depends on the child’s age and how many years are left before the funds are needed. When a child is young and post-secondary is still 10 or more years away, many families choose growth-oriented investments like index ETFs to take advantage of long-term compounding. As the child gets closer to post-secondary age, some families shift toward more stable options like GICs or high-interest savings to protect the balance from a market downturn just before the money is needed. Neither approach is universally right; it depends on your risk tolerance and timeline.
Can an RESP be used for college or trade school, not just university?
Yes. RESP funds can be used for a wide range of post-secondary programs in Canada and some abroad, including colleges, trade schools, apprenticeship programs, and CEGEPs in Quebec. The program must be at a designated educational institution to qualify for Educational Assistance Payments.
Is there a deadline to open an RESP?
To receive the CESG, contributions need to start before the end of the calendar year the child turns 15, and specific conditions apply for 16 and 17-year-olds. For the CLB, applications can be made retroactively up to the day before the child’s 18th birthday. The RESP itself can be opened at any time, but starting earlier gives more time to accumulate grants and growth.
What happens to the RESP if I move out of Canada?
If the subscriber moves out of Canada, CESG and CLB eligibility generally stops because both grants require the beneficiary to be a Canadian resident. The RESP can remain open and continue to grow, but no further government grants will be deposited while the beneficiary is a non-resident. Existing grant money already in the account is not clawed back simply because of a move.
The Bottom Line
An RESP is one of the few savings vehicles in Canada where the government puts money in alongside you. The 20% CESG match on up to $2,500 per year is effectively a guaranteed return on that portion of your contribution before any investment growth is considered. For families who qualify for the CLB, the benefit is even more compelling since no contribution is required to receive it.
Opening an RESP is straightforward and can be done at most banks, credit unions, and online brokerages. The earlier you start, the more grant years you have available and the longer your savings have to grow.
For the most current grant amounts, income thresholds, and eligibility details, the Government of Canada’s education savings page is the most reliable source.
Financial Disclaimer: The information in this post is for educational purposes only and does not constitute financial advice. PlanSmartFi is not a financial advisor. Grant amounts, income thresholds, and program rules are set by the federal government and are subject to change. Always verify current details directly at canada.ca and consider speaking with a licensed financial professional before making any financial decisions.