Education savings that work: What every Canadian family should know about RESPs 

One of the most effective ways to prepare for a child’s future is through the Registered Education Savings Plan (RESP) – a uniquely powerful tool for education savings that combines tax advantages with government support.

Used correctly, RESPs can significantly reduce the financial burden of post-secondary education. Yet many families delay opening an account or don’t fully understand how to maximize the available benefits. This article outlines what makes RESPs so effective – and the key actions you should take to ensure you don’t leave money on the table.

What is an RESP?

A Registered Education Savings Plan is a government-registered investment account that helps you save for a beneficiary’s post-secondary education. Anyone can open an RESP on behalf of an eligible child – including parents, grandparents, other relatives, or even family friends.

RESPs offer three core advantages:

• Tax-deferred growth: Earnings on investments grow tax-free while held inside the plan.
• Government grants and bonds: Eligible families receive financial contributions from the federal government.
• Flexibility: RESP funds can be used for tuition, books, housing, and other costs at colleges, universities, trade schools, or apprenticeship programs.
   

Government incentives: Up to $9,200 in support

The RESP program includes two major sources of government funding:

1. Canada Education Savings Grant (CESG)¹

The CESG matches 20% of annual contributions up to $500 per child, per year, up to a lifetime limit of $7,200.

Unused CESG room can be carried forward and used in future years, but you can only receive up to $1,000 in CESG matching per year.

2. Canada Learning Bond (CLB)²

Available to lower-income families, the CLB offers up to $2,000 per child without requiring any contributions into their RESP.

Eligible children receive $500 to start, then $100 per year until age 15.

Eligibility is based on family income and requires the child’s primary caregiver to file income tax returns and qualify for the Canada Child Benefit.

Contribution and eligibility rules

RESPs are highly flexible, but they do come with important limits and deadlines:

• Lifetime contribution limit: $50,000 per beneficiary. If you over-contribute, you’ll be taxed on the over-contribution amount at a rate of 1% per month, until you withdraw the over-contribution.³
• CESG eligibility ends: December 31 of the year the child turns 17.¹
• CLB eligibility: Based on household income and caregiver tax filing status.
• Investment flexibility: RESP funds can be invested in a variety of assets, including mutual funds, ETFs, GICs, and stocks.
   

Why early contributions matter

Many families delay starting an RESP because their children are still young, or money is tight. But waiting leads to missed opportunities for compound growth and unclaimed government grants.

Starting early – even with modest contributions – allows families to take full advantage of:

• Annual CESG matching
• Longer investment time horizon
• Greater cumulative tax-free growth potential
   

For example, contributing just $25 per month starting when your child is born could result in a significant education fund by age 18, thanks to government matching and compound returns.

The key takeaway: time in the market matters more than timing the market. Families that start early and contribute regularly are typically in a much stronger position when post-secondary expenses begin.

Common mistakes to avoid

Through our work with clients, we frequently encounter the same RESP-related challenges:

• Waiting too long to open the plan, which reduces grant eligibility and growth potential.
• Missing contribution deadlines, especially for CESG eligibility in the year the child turns 17.
• Failing to file taxes, which can disqualify a family from receiving the CLB.
• Overcontributing, which may lead to tax penalties.
• Using overly conservative or aggressive investments, depending on the child’s age and time horizon.
   

Each of these issues is preventable with proper planning and advice.

Getting started

The RESP is one of the most effective, accessible, and underutilized savings vehicles available to Canadian families. No matter what you’re able to contribute, the most important decision is simply to start.

As Mark Twain said, “The secret of getting ahead is getting started.”

We're here to help

Whether you need help opening your first RESP or want a second opinion on your current strategy, we’re here to listen, understand your goals, and guide you to the right next step.

Contact us today to start planning with confidence.

Check out this video to learn more! 

Our very own Fraz Mirza explains the fundamentals of RESPs, how the government incentives work, and why waiting to contribute is the single most common – and most costly – mistake families make. 

Sources

1. Canada Education Savings Grant. November 29, 2024. Government of Canada. https://www.canada.ca/en/revenue-agency/services/tax/individuals/topics/registered-education-savings-plans-resps/canada-education-savings-programs-cesp/canada-education-savings-grant-cesg.html.  

2. Canada Learning Bond. November 29, 2024. Government of Canada. https://www.canada.ca/en/revenue-agency/services/tax/individuals/topics/registered-education-savings-plans-resps/canada-education-savings-programs-cesp/canada-learning-bond.html.  

3. Managing the Registered Education Savings Plan, taxes and transfers. June 27, 2024. Government of Canada. https://www.canada.ca/en/services/benefits/education/education-savings/managing-plan.html.