Funding a child’s post-secondary education is one of the biggest financial goals for many Canadian families, and a Registered Education Savings Plan (RESP) is one of the most effective ways to achieve it.
An RESP allows your investments to grow tax-deferred, and it also gives access to valuable government grants. The cornerstone of this is the Canada Education Savings Grant (CESG), which matches a portion of annual contributions to a maximum lifetime grant of $7,200 per child. Additional support is available for low- and middle-income families through enhanced CESG rates and the Canada Learning Bond (CLB), which can add up to $2,000 in grants without requiring any personal contributions.
There are three types of RESPs: individual, family, and group. Family plans offer flexibility for families with multiple children, allowing funds to be allocated based on actual education needs. Group plans, by contrast, are pooled and more rigid, often with higher fees and stricter rules.
Once the child begins post-secondary education, understanding how RESP withdrawals are taxed and how to structure them is key. Withdrawals are divided into two parts: Educational Assistance Payments (EAPs), which include the grants and investment growth and are taxable to the student; and Post-Secondary Education (PSE) withdrawals, which return your original contributions tax-free. With smart planning, families can minimize taxes by timing EAP withdrawals in the student's lower-income years and using PSE funds to top up as needed.
Even if the child does not end up pursuing post-secondary education, RESP savings don’t go to waste. The original contributions can always be withdrawn tax-free. Families can also transfer funds to a sibling, roll investment income into an RRSP or RDSP (if eligible), or donate unused contributions to a post-secondary institution. The plan can also remain open for up to 35 years, providing ample flexibility in case the beneficiary decides to pursue education later in life.
RESPs are not just about saving, they are also about optimizing. They offer an opportunity to grow education funds tax-efficiently, benefit from government incentives, and structure withdrawals in a way that reduces your family’s overall tax burden.
If you want to make the most of your RESP, we have put together a comprehensive white paper that covers everything from contribution strategies and grant eligibility to advanced tax planning and what to do if your child does not go to school. It is designed to help you navigate this important financial tool with clarity and confidence.
Ready to dive deeper? Check out our full RESP Guide and get the insights you need to build a stronger education plan for your family.
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