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Is an RESP worth it? Yes, even if only for the government grants – MoneySense
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Why open an RESP? Grants and tax-deferred growth
The federal government introduced the RESP nearly 50 years ago to help families save for their kids’ post-secondary education. The big draw for parents: Investment growth inside an RESP was (and still is) tax-sheltered. You can contribute up to $50,000 per child into an RESP, and the account can stay open for up to 35 years.

In the years since the RESP was launched, the government has added grant programs to further encourage families to save.

RESP grants

Canada Education Savings Grant: The CESG is a matching grant. For the “Basic CESG,” the government will match 20% of your contributions, up to $500 per year. To get the full $500, you would need to contribute $2,500 in a year. If your family’s adjusted income is below a certain amount, you can also receive the “Additional CESG,” which is an extra 10% or 20% on your first $500 per year. The CESG’s lifetime maximum, including any Additional CESG, is $7,200 per child.

Canada Learning Bond (CLB): Kids born in 2004 or later whose family’s adjusted income is below a certain threshold could get $500 the first year they’re eligible, plus another $100 each year until they reach age 15, if they continue to qualify (based on income). To apply for the CLB, you don’t need to make a personal contribution. The CLB’s lifetime limit is $2,000 per child. This grant is retroactive and kids can still be eligible up to the day before they turn 21.

British Columbia Training and Education Savings Grant (BCTESG): For B.C. residents only, this grant adds $1,200 to an RESP. You must apply between a child’s sixth and ninth birthdays.

Quebec Education Savings Incentive (QESI): For Quebec residents only, this grant matches 10% of your annual RESP contribution, up to $250. The QESI’s lifetime maximum is $3,600.

Use an RESP calculator
The RESP is a powerful savings tool because of the CESG and other government grants. To see how they can boost the growth of your savings, try out different scenarios using an RESP calculator. You can change the variables—including the child’s age, initial deposit, monthly contributions and projected rate of return—and see how your savings might stack up against the cost of post-secondary school.

How to open an RESP account

To start saving for your child’s college or university expenses and take advantage of government grants, you can open a plan with an “RESP promoter”—the government’s term for a financial institution that offers RESPs. You can open an individual plan or a family RESP, for multiple kids.

Embark, a Canadian fintech focused on education savings and planning, helps families maximize their savings and government RESP grants. It also manages RESP investments, using a “glide path” approach tailored to your child’s age. So, the closer they get to starting college or university, the more conservative the approach for managing the investments.

More about RESPs:

This article is sponsored.

This is a paid post that is informative but also may feature a client’s product or service. These posts are written, edited and produced by MoneySense with assigned freelancers and approved by the client.

About Jaclyn Law

Jaclyn Law is MoneySense’s managing editor. She has worked in Canadian media for over 20 years, including editor roles at Chatelaine and Abilities. Jaclyn completed the Canadian Securities Course in 2022.
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Jaclyn Law

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February 12, 2024
Top 5 questions about family RESPs – MoneySense
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What is a family RESP?

Canadians can choose from two types of RESPs: individual and family. Both are registered accounts, meaning that they’re registered with the federal government, and they allow your savings and investments to grow on a tax-sheltered basis.

Here are the key features you should know about for both types of RESPs:

The lifetime RESP contribution limit per beneficiary (child) is $50,000.

A beneficiary can have more than one RESP (for example, if a parent opens one and a grandparent opens one), however, the maximum contribution is still $50,000.

The Canada Education Savings Grant (CESG) matches 20% of the first $2,500 in RESP contributions per year. That’s $500 in free money per year!

If your family’s adjusted income is below a certain amount (for 2023, it was $106,717), you can also receive the “Additional CESG,” which adds up to $100 more, after you contribute your first $500 per year.

The CESG’s lifetime maximum, including Additional CESG, is $7,200 per child.

Low-income families also receive the Canada Learning Bond (CLB), with no personal contribution required, to a lifetime maximum of $2,000 per child.

Families in British Columbia and Quebec have access to additional grants: $1,200 in British Columbia and up to $3,600 in Quebec. (Read more about these provincial RESP grants.)

You won’t get a tax deduction for contributing to an RESP like you would with a registered retirement savings plan (RRSP), but your contributions won’t be taxed when withdrawn.

Government grants and growth inside an RESP are taxed when withdrawn, but they’ll be taxed at the child’s marginal tax rate—which will likely be very low.

You can turn an individual RESP into a family RESP anytime, as well as add and remove beneficiaries from the plan.

Now that we’ve covered RESP basics, let’s tackle five of the most common questions about family RESPs we get at Embark.

1. How are funds in a family RESP divided among beneficiaries?

Here’s where the flexibility of a family RESP comes into play. Outside of the CLB, government grants and the growth on the investments can be shared among the plan’s beneficiaries—and the amounts don’t have to be equal. So, if one child’s education costs more than another’s, you can divide the funds accordingly. You can also start using RESP funds for one child’s post-secondary education while another is still in grade school and collecting grant money. It’s nice to have that flexibility.

2. What if one or more beneficiaries do not use their RESP funds?

In a family RESP, one child’s unused funds can be allocated to another child’s education. If none of the beneficiaries attend school, you could keep the plan open in case they change their mind.

You could also transfer any unused income in the RESP to your or your partner’s RRSP as an Accumulated Income Payment (AIP). The transfer limit is $50,000, and you would have to return any government grants. Three other requirements to be aware of: You must have enough RRSP contribution room to make the transfer; the RESP must have been open for a minimum of 10 years; and the beneficiaries must be age 21 or older and not pursuing further education.

If you don’t intend to add any more beneficiaries to the plan, and you don’t need the RESP any longer, you could close it. If eligible, your original contributions will be withdrawn tax-free, but you will pay taxes on any investment gains—unless they’re transferred to your RRSP as an AIP.

3. Can you add another generation of beneficiaries to an existing family RESP?

The short answer is no. Within a family RESP, all beneficiaries must be related by blood or adoption, meaning only siblings can be added to a family RESP. This would prohibit a grandparent from adding their grandchildren to a family RESP that was previously opened for their children. Additionally, since an RESP can only be open for 35 years, adding a younger sibling to a plan initially opened for someone close to or at withdrawal age would significantly cut down the time the younger beneficiary has to accumulate savings before the RESP would be closed.
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Andrew Lo

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December 1, 2023
Contributing to your grandchild’s RESPs: What grandparents need to know – MoneySense

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The best way to save for school: Open an RESP

Ideally, your grandchild or grandchildren will have an RESP. Perhaps your own kids have already opened one for them. If not, you can open an RESP—in fact, anyone can become a “subscriber,” including parents, guardians, grandparents, other relatives, and friends. A child can be the “beneficiary” of multiple RESPs, but here’s the key detail to note: the lifetime RESP contribution limit per child is $50,000. Any excess contributions will be taxed, so it’s important for contributors to coordinate their efforts.

An overview of RESPs

If you’re new to RESPs, here are some common questions (and the answers) about these plans:

What is an RESP? RESPs are registered savings and/or investment accounts, meaning they’re registered with the Canadian government and they offer tax advantages.

What can RESPs be used for? Your grandchild(ren) will be able to use their RESP to pay for tuition plus a wide range of other educational expenses: accommodations, textbooks, school supplies, transportation, and more.

Where can I open an RESP? At a bank or an investment firm, including providers that specialize in RESPs, like Embark. You will need your grandchild’s social insurance number (SIN)—another good reason to coordinate with their parents.

What can an RESP hold? A wide range of assets, including cash, bonds, guaranteed investment certificates (GICs), stocks, mutual funds and exchange-traded funds (ETFs).

Are RESPs taxed? Money and investments held inside an RESP grow tax-sheltered. The grants and growth—including interest, dividends and capital gains—aren’t taxed until withdrawn, and then they’re taxed at the beneficiary’s (child’s) marginal tax rate. (This will likely be very low since they’re in school.)

Do I get a tax deduction for contributing to an RESP? No. But you also don’t pay tax when you withdraw the money you contributed.

Why else should I open an RESP? The biggest incentive for opening an RESP is free government grants. Through the Canada Education Savings Grant (CESG), the Canadian government will match 20% of your contributions, up to $500, in a given year, up to a lifetime limit of $7,200. In addition to the CESG, families below a certain income threshold may also qualify for additional government grants, called the Additional Canada Education Saving Grant (ACES) and the Canada Learning Bond (CLB). The CLB grant does not require plan subscribers to make any contributions. Families living in certain provinces (Quebec and British Columbia) can also apply for other grants. Read more about government RESP grants.

What if I have multiple grandchildren? You or the children’s parents can open a family RESP. Keep in mind that all children within the RESP must be related by blood or adoption (siblings). This means that as a grandparent, if you have multiple grandchildren (who are not all siblings), each group will need their own RESP. The grants and growth in a family RESP can be shared among beneficiaries—very helpful if one child’s education costs more than another’s.

How long can an RESP stay open? A very long time: 35 years. But it’s important to pay attention to the annual RESP deadline of Dec. 31, if you want to maximize government grants.

What’s the best way to get the maximum RESP grant?

To get the maximum CESG amount of $7,200, it’s a good idea to plan for RESP contributions. This is helpful both for organizing your own finances and for coordinating between contributors, including your grandchildren’s parents. You could even automate your contributions, to make it easier to stick to a consistent schedule.

First, let’s look at how to get the maximum of $500 in CESG in a given year. The government matches 20% on the first $2,500 annually, so a child’s RESP contributors would need to put in $2,500 to get $500 in CESG each year. Collectively, you can contribute more than $2,500 in any year—there’s no limit to annual RESP contributions (not exceeding the $50,000 lifetime limit)—but the maximum CESG per year is $500.

To get the maximum lifetime CESG amount of $7,200 for the child, the RESP contributors will need to put in $2,500 per year for 14 years, and then another $1,000 when the child is age 15. If you don’t contribute $2,500 in a certain year, you can catch up the following year, but note that the maximum CESG in one year is $1,000—meaning you can only catch up one year at a time.

Call in the experts

If you need guidance on planning RESP contributions, maximizing government grants and adjusting RESP investments over time, talk to the Education Savings Specialist at Embark. Right now, Embark has a special offer for MoneySense readers: Start an account using the promo code MONEYSENSE100 and it will contribute $100 to your grandchild’s education when you save $200. Visit Embark* for details.

Read more about RESPs:

This article is sponsored.

This is a paid post that is informative but also may feature a client’s product or service. These posts are written, edited and produced by MoneySense with assigned freelancers and approved by the client.

What does the * mean?

If a link has an asterisk (*) at the end of it, that means it’s an affiliate link and can sometimes result in a payment to MoneySense (owned by Ratehub Inc.) which helps our website stay free to our users. It’s important to note that our editorial content will never be impacted by these links. We are committed to looking at all available products in the market, and where a product ranks in our article or whether or not it’s included in the first place is never driven by compensation. For more details read our
MoneySense Monetization policy.

About Andrew Lo

Andrew Lo is the CEO of Embark, Canada’s education savings and planning company. As a fintech leader for over 30 years, he’s focused on making the best financial services available to Canadians.

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Andrew Lo

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December 1, 2023
Are RESP contributions tax-deductible? – MoneySense

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First, a quick refresher on these registered accounts: RESPs provide a tax-advantaged way to invest in your children’s or grandchildren’s future education. Contributions to an RESP account and investments held in an RESP are tax-sheltered as long as they remain inside it. And that’s not the only benefit of opening an RESP. The Canadian government also contributes by matching grants to your child’s RESP through the Canada Education Savings Grant (CESG). (More on government grants below.)

Maximizing RESP contributions and understanding withdrawal rules can save you a lot in taxes while you save for your child’s or grandchild’s post-secondary education. Let’s look at common questions in more detail.

Is an RESP tax-deductible?

Unlike with a registered retirement savings plan (RRSP), RESP contributions themselves do not give you a tax deduction. However, this doesn’t make the RESP account less powerful as an education savings vehicle. The RESP has three significant benefits for investors:

Tax-sheltered growth: Money invested in an RESP is tax-sheltered, meaning it continues to grow tax-free as long as it stays within the RESP account.

Withdrawals are taxed in the hands of the beneficiary: Unlike RRSPs, money withdrawn from an RESP and used towards educational expenses is taxed in the hands of the plan’s “beneficiary” (the student), not its “subscriber” (parent or grandparent who opened the account). This is good news, because students are usually in a lower tax bracket than their parents or grandparents and will likely pay little to no income tax.

Government grants: The RESP is made more attractive by the Canada Education Savings Grant (CESG), a 20% boost to your RESP made by the federal government, up to a yearly maximum of $500 and a lifetime maximum of $7,200. If you contribute $2,500 to the RESP in a given year, the government will contribute 20% of that: $500. Some families are eligible for other government grants, too.

Is money earned in an RESP taxable?

Money earned within an RESP could come from interest, dividends or capital gains, along with government contributions mainly through the CESG. As long as these earnings remain within the RESP account, they are not subject to tax, allowing the power of compounding to work its magic. This tax-sheltering of RESP earnings ensures that your investment and government grants can grow unimpeded by taxes, until they’re needed for the beneficiary’s post-secondary education. But, unlike a tax-free savings account (TFSA), RESP withdrawals are not tax-free when withdrawn. The money withdrawn for the beneficiary’s education—whether investment gains or grant money—is categorized as Educational Assistance Payments (EAP) and taxed in the hands of the beneficiary (the student).

How do I report an RESP on tax returns?

Reporting your RESP on tax returns is pretty straightforward. Because RESP gains are tax-sheltered, you don’t need to make any tax declarations until the RESP money is withdrawn as EAPs. Once the money is withdrawn to pay for the beneficiary’s educational expenses, the RESP provider will give the beneficiary a T4 slip specifying the total amount of money received as EAPs in the tax year—including investment income and government grants. The amount from this T4 slip must be entered as “income” on the beneficiary’s tax return.

Are RESP over-contributions taxed?

Although RESPs don’t have a yearly contribution limit, they do come with a lifetime contribution limit of $50,000. And yes, RESP over-contributions are definitely taxable. If contributions exceed the lifetime contribution limit of $50,000, the excess contribution is taxed at 1% per month until it’s withdrawn. This tax on overcontributions must be paid within 90 days after the end of the year in which the overcontribution happened. Overcontributions can be withdrawn and do not need to remain in the RESP.

RESPs serve as a tax-advantaged account for post-secondary educational savings and investments. It beneficially weaves together tax-sheltered investment growth, government grants and favourable withdrawal taxation rules. If you understand RESP contribution and withdrawal rules, the RESP account can be invaluable to your family’s financial toolkit.

If you need more guidance on RESPs and taxes, help is available. The RESP experts at Embark can show you how to maximize your savings and minimize taxes. Currently, Embark has a special offer, exclusive to MoneySense readers: Start an account using the promo code MONEYSENSE100 and Embark will contribute $100 to your child’s education when you save $200. Visit Embark* for details.

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Aditya Nain

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December 1, 2023
You opened an RESP—now what? – MoneySense

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Once you’ve opened an RESP for your (grand)child or (grand)children, though, what should you do with it?

How often and how much to contribute to an RESP

Ideally, you should contribute at least $2,500 per year, if possible. An RESP can stay open for up to 35 years, giving you plenty of time to contribute up to the $50,000 maximum. An important date to be aware of when it comes to your contributions is December 31st of each year. The end of December marks the government grants deadline, specifically for the Canada Education Savings Grant (CESG). This grant matches 20% of your first $2,500 in contributions per year, up to $500, to a lifetime maximum of $7,200 per child. (To get the full $7,200, you need to contribute $36,000 strategically.)

The CESG is available until the end of the calendar year that your child turns 17. But take note: you can only catch up on the CESG one year at a time, for a maximum grant of $1,000 in a given year. That’s why it’s best to contribute early, often and to stick to a schedule.

Read more about government RESP grants and the RESP contribution deadline.

What investments can you put in an RESP?

You can deposit and save cash inside an RESP, but its value is unlikely to keep pace with inflation over time. Many families invest in the account so that the money has the potential to grow. An RESP can hold:

These types of assets have varying levels of risk and potential reward. Bonds and GICs have guaranteed rates of return, while mutual funds, ETFs, stocks and options depend on the performance of financial markets. It’s important to choose investments that fit your family’s needs and situation, including your time horizon (how long until your child heads off to college, university or trade school) and risk tolerance (your comfort level with investment volatility). Your child’s RESP shouldn’t be keeping you up at night.

An RESP expert can help you choose investments

Maybe you’re very good at saving but you’re new to investing. You can call upon RESP experts, such as those at Embark, for assistance. Embark’s Student Plan uses a glide path investment strategy that automatically adjusts to build savings when your child is young, before investing more conservatively closer to your withdrawal period so you’ll have as much funding as possible when you need it. Currently, Embark has a special offer, exclusive to MoneySense readers: Start an account using the promo code MONEYSENSE100 and Embark will contribute $100 to your child’s education when you save $200. Visit Embark* for details.

Read more about RESPs:

This article is sponsored.

This is a paid post that is informative but also may feature a client’s product or service. These posts are written, edited and produced by MoneySense with assigned freelancers.

What does the * mean?

If a link has an asterisk (*) at the end of it, that means it’s an affiliate link and can sometimes result in a payment to MoneySense (owned by Ratehub Inc.) which helps our website stay free to our users. It’s important to note that our editorial content will never be impacted by these links. We are committed to looking at all available products in the market, and where a product ranks in our article or whether or not it’s included in the first place is never driven by compensation. For more details read our
MoneySense Monetization policy.

About Andrew Lo

Andrew Lo is the CEO of Embark, Canada’s education savings and planning company. As a fintech leader for over 30 years, he’s focused on making the best financial services available to Canadians.

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Andrew Lo

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November 23, 2023
What is the RESP contribution deadline? – MoneySense

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To maximize your savings and help to ensure your child has the funds they need when they go off to college or university, you’ll need to deposit yearly contributions—and do it before the ball drops on New Year’s Eve. An RESP can stay open for as long as 35 years, so why the urgency? You need to meet the RESP contribution deadline in order to receive the maximum amount of grant money from the government, which could be as much as $500 a year. Consider it a “holiday gift” for their future.

Why contribute to an RESP every year

One of the best ways for you to save for your child’s higher education is to open and contribute to an RESP. That’s because the benefits are twofold. First, a government program called the Canada Education Savings Grant (CESG) will match 20% of the annual contributions, up to $500 in a given year, to a lifetime maximum of $7,200. Children from families considered to be low-income or middle-income can get an additional 10% or 20% of the first $500 contributed to their RESP. There’s also the Canada Learning Bond (CLB), which can provide up to another $2,000 to low-income families: $500 in the first year the child is eligible to receive it, and $100 per year until the child reaches age 15.

Second, your child’s RESP will grow tax-deferred. The gains that the investments make over time won’t be taxed until your child enrolls in a recognized post-secondary program and withdraws the funds, and as long as the money is used for their tuition, living and educational expenses.

What if you don’t contribute $2,500 this year?

That’s OK. The CESG gives you a chance to catch up on contributions in future years. This savings grant is available until the end of the calendar year that your child turns 17. But be aware that you can only catch up one year at a time, for a maximum grant of $1,000 in a given year. An Embark Education Savings Expert can help you calculate how much to contribute when you need to play catch-up, and how much you will receive from the government.

What is the maximum RESP contribution?

An RESP has a lifetime contribution limit of $50,000 per child. You can get up to $500 from the CESG in a given year—to get the full $500, the RESP contribution for the year must be at least $2,500. Contributing more than $2,500 in any year won’t get you a bigger grant, but it will give your savings more time to grow. To get the CESG maximum of $7,200, you’ll need to contribute $36,000 to the RESP.

Make a plan for RESP contributions

It can be hard to free up $2,500, especially leading up to the holiday season. That’s why many families break down their yearly goal into a more manageable monthly savings target. Putting aside $208 each month feels a bit more manageable. To get you to that monthly goal without feeling as much of a pinch in your household budget—which for many families is tighter than ever these days—try these savings tips:

Ask grandparents, other relatives and family friends to consider contributing in lieu of gifts for birthdays and holidays.

If you’re able, re-route some or all of the monthly government child-tax benefit you receive into the RESP.

When your child is old enough to start earning a bit of money (by babysitting, for example), encourage them to put some of that money into their RESP. (This is a great opportunity to teach them about compound growth.)

Set up a monthly or biweekly pre-authorized contribution plan to help yourself save automatically.

To get a better idea of how your savings, combined with the CESG, could grow over the years, check out this savings calculator from Embark.

Just think: If $2,500 is put in an RESP each year for 14 years, plus another $1,000 in the 15th year, your child will be able to get the full $7,200 from the CESG. For example, if you opened an RESP today for a two-year-old and contributed $2,500 each year to receive the maximum annual CESG contribution of $500, your savings could grow to about $59,000 by 2039. (All calculation assumptions, including assuming an average rate of return of 3%, can be found on the Embark savings calculator.)

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Karen Robock

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October 26, 2023

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