“The great aim of education is not knowledge but action.” — Herbert Spencer
A Registered Education Savings Plan (RESP) allows individuals to contribute to a trusteed plan to finance the cost of post-secondary studies for a child, grandchild, or even themselves.
In this blog, we will explore why Canadians should consider registering for an RESP, as well as what factors can help plan for your family’s future financial security and lifetime earnings potential.
Although contributions are not tax-deductible, investment returns accumulate in the plan tax-free and can be paid to a student as an Education Assistance Payment (EAP). Thankfully, most students have little to no income, meaning that many can withdraw on a tax-free basis during their education. But even with these benefits in place, Canadians don’t seem to be taking advantage of the opportunities available to them.
An RESP, which has a maximum life of 35 years, is typically a family or non-family plan. Most family plans allow for the addition of related beneficiaries throughout the plan’s term, while non-family plans are not subject to this requirement. As far as qualified investments go, an RESP follows a similar path as RRSPs, with the exception of certain annuity contracts:
| Investment Type | Qualifies | Notes |
|---|---|---|
| Cash, guaranteed investment certificates (GICs) | Yes | |
| Mutual funds | Yes | Including segregated funds |
| Exchange-traded funds (ETFs), real estate investment trusts (REITs) | Yes | Must be listed on a designated exchange |
| Public company shares | Yes | Most major world exchanges included |
| Government/provincial bonds | Yes | |
| Listed corporate bonds | Yes | |
| Investment-grade private bonds | Yes | Must have investment-grade rating at acquisition |
| Insured mortgages | Yes | Under specified federal/provincial laws |
| Private company stock, uninsured mortgages, certain commodities | No | Not qualifying investments |
Table 1: Sample qualified investments as defined in the Income Tax Act. Government of Canada.
Through the Employment and Social Development Canada (ESDC) initiative, the federal government incentivizes parents, family, and friends to help children pursue higher education by paying a grant determined by contributions made to an RESP.
The ultimate goal of the Canada Education Savings Grant (CESG) program is to encourage long-term savings intended for post-secondary education, and as such, beneficiaries who are 16 or 17 years of age have specific requirements to be eligible. Namely, one of the following conditions must be fulfilled:
The RESP must have a minimum of $2,000 contributed to (and not withdrawn from) before the end of the calendar year when the beneficiary turns 15 years old.
At minimum, an annual contribution of $100 was made to (and not withdrawn from) the RESP four years or fewer prior to the end of the calendar year of the child turning 15 years old.
The maximum annual CESG per beneficiary is $500, or 20% of the first $2,500 of contributions calculated annually. Each child is entitled to a cumulative lifetime CESG of $7,200. As of July 2025, additional CESG may be available for households that have an annual net income below $57,375 with 1–3 children.
A plan that has not been contributed to for a year or more and therefore has unused contribution room for future years can receive a CESG of not more than $1,000 in a calendar year—given the 20% rule mentioned above, a $5,000 contribution would be required to receive that amount.
Low-income families with children born in 2004 or later may be eligible for a CLB, which provides an initial payment of $500 and an additional $100 for each year of eligibility. In other words, $2,000 is the maximum possible allotment through the program. The period ends once the child is 15 years of age or if household income falls under the threshold—for July 2025, families with 1–3 children must have a net family income below $57,375 to be eligible for maximum benefits. This figure is indexed annually, as the table below indicates.
The ESDC will deposit $25 into the account in an effort to help cover the cost of opening an RESP, and the CLB will deposit $500 after that. In theory, this should help families who are discouraged by the one-time expense of opening an account.
| Number of children | Income bracket range | Adjusted income level |
|---|---|---|
| 1 to 3 | Less than or equal to | $57,375 |
| 4 | Less than | $64,733 |
| 5 | Less than | $72,123 |
Table 2: Revised income brackets for the Canada Learning Bond (CLB) for the July 1, 2025, to June 30, 2026, benefit year. Government of Canada.
It’s worthwhile to note that personal contributions are not necessary for children to receive CLB benefits.
Education Assistance Payments are distributions of non-contribution amounts accumulated in the RESP. To be entitled to receive payments, a beneficiary must be registered in a qualifying post-secondary program. An $8,000 limit applies to Educational Assistance Payments paid to full-time students during the first 13 consecutive weeks of an eligible program, following which there is no limit on withdrawals as long as the child maintains their registration status. Part-time students who take at least 12 hours of courses per month can generally receive EAPs up to $4,000 per semester. RESP beneficiaries can receive payments from the plan up to six months following termination from the program.
Original contributions to the plan can be withdrawn tax-free at any time, but if education is not pursued, any CESG and CLB must be repaid. Further, the accumulated interest payments are taxed at the subscriber’s marginal rate plus an additional 20% tax, which can be mitigated by transferring up to $50,000 to an RRSP.
In plain terms, contribution refunds are never taxed, government grants must be reimbursed if not used for education, and growth within the account is taxable. Specific withdrawal strategies can potentially minimize taxes.
Under certain circumstances, individuals may consider withdrawing the principal contributions and income generated by the plan. Depending on the scenario, there are certain ways to reduce the payable taxes by transferring the accumulated income payments to tax-advantaged accounts. We recommend consulting with an accountant or a Family Wealth Advisor to learn more about your situation and next steps.
Although university, apprenticeships, or college aren’t for everyone, the important takeaway is that the RESP should be considered a tool to provide children with as many options as possible for their future.
Planning ahead can be difficult, but if it means the next generation will be better equipped to find their calling in life, it’s worth it. It might be helpful to think of an RESP as an investment in keeping as many doors as possible open for your children—the one they choose is up to them, whether that involves higher education or otherwise.
This is a surface-level overview of just one of the many resources at your disposal to help your loved ones get ahead. There are always nuances to consider when planning, and if you have any questions, we’re here to answer them.
