Investments

RESP — Registered Education Savings Plan

The cost of a degree in Canada rises most years, and a four-year program with accommodation runs well into five figures. Without a plan the options narrow to borrowing, remortgaging, drawing down retirement savings, or leaving the student with the debt. An RESP is how you avoid that choice.

How It Works

Your money, plus the government's

The grant is the point

You contribute; the government adds the Canada Education Savings Grant on top, calculated as a percentage of your contribution up to an annual maximum per child. Lower-income families may also receive the Canada Learning Bond, which is paid without any contribution at all.

Grant room carries forward, so a family that starts late can catch up to a degree by contributing more per year — though there is a cap on how much grant can be collected in any one year, which is why starting early beats catching up.

Growth is sheltered until it is withdrawn

Contributions are not deductible, but everything the plan earns grows untaxed inside it. When the money comes out for education, the grant and the growth are taxed in the student’s hands — and a student with little other income usually pays very little or nothing.

Your own contributions come back to you untaxed, because you already paid tax on them.

What counts as education

More than university. Colleges, trade schools, apprenticeships and many part-time programs qualify. The definition is broader than most parents assume, which matters if a child does not take the route you expected.

Choosing a Plan

Individual, family, or group

Individual plans

One named beneficiary, who does not have to be related to you. This is the plan to use if you are saving for a child you are not related to — a godchild, a grandchild through marriage — or for yourself as an adult learner. Note that grants are only available where the beneficiary meets the eligibility rules.

Family plans

More than one beneficiary, all of whom must be related to the subscriber. The advantage is flexibility: if one child does not pursue post-secondary education, the earnings can generally be directed to a sibling within the same plan rather than unwound.

Group plans

Pooled arrangements sold by scholarship plan dealers, with fixed contribution schedules and rules about what happens if you stop paying or the child changes path. They are not inherently bad, but they are considerably less flexible than the other two and the fee structures deserve reading in full before you sign.

What if the child does not go? Your own contributions come back to you. Unused grant money is returned to the government — that part is not yours to keep. The growth can often be moved into your RRSP if you have room, or withdrawn with extra tax on top. A family plan with siblings, or simply waiting, are usually better answers than collapsing the plan early.

No obligation

Starting late is still worth it.

Plenty of parents assume that if they did not start when the child was born there is no point. Grant room carries forward, so catching up is possible. Tell an advisor the child's age and what you can put aside, and you will get a realistic picture.

Talk to an advisor

RESP questions

Enough to collect the full annual grant, if you can — that is the point at which each extra dollar stops being matched. Beyond it, contributing more still shelters growth but earns no grant.

Yes, both on contributions per beneficiary and on total grant per child. The figures are set by the CRA and are worth checking before a large one-off contribution, since over-contributing attracts a penalty.

Yes. Anyone can be a subscriber. Where several relatives want to contribute for the same child it is usually cleaner to have one plan and pay into it, rather than several plans that each have to be tracked against the same grant limits.

The RESP is still usable — scholarships rarely cover everything, and the plan can go toward accommodation, books and living costs. It does not have to be spent on tuition.

Generally up to 35 years from opening, which is far longer than most people need and gives plenty of room for a child who takes time out before studying.

Saving for a child's education?

Call 437-428-2828 and talk it through with a licensed advisor. Mon–Sat, 9am–8pm ET. No obligation, and nobody will push you to buy on the call.

Call 437-428-2828