Investment
Free Money for College? The RESP Strategy Every Parent Should Know
Let’s talk about one of the smartest ways to prepare for your child’s future: the Registered Education Savings Plan, or RESP. In a country where post-secondary education costs continue to rise—with average tuition now over $7,000 per year—the RESP isn’t just helpful, it’s essential. It’s a government-sponsored account designed to help families save for college, university, or other qualifying programs, with generous tax advantages and matching grants that make every dollar go further.
So how does it work?
At its core, the RESP is a tax-sheltered investment account. You can contribute up to $50,000 per child over their lifetime. There’s no annual contribution limit, so you can contribute at your own pace. The money you put in grows tax-free, and when it’s withdrawn to pay for education, it’s taxed in the student’s hands—who often has little or no income, meaning little or no tax.
But the real magic of the RESP comes from the Canada Education Savings Grant (CESG). For every dollar you contribute, the government adds 20 cents, up to $500 per year, with a lifetime maximum of $7,200 per child. That’s a guaranteed 20% return—before your investments even start growing. Families with lower incomes may qualify for additional CESG and the Canada Learning Bond (CLB), which can add up to $2,000 more, even if you don’t contribute yourself.
There are three types of RESPs:
Individual RESP: One contributor, one beneficiary. Simple and flexible.
Family RESP: Multiple beneficiaries (must be related by blood or adoption). Great for families with more than one child.
Group RESP: Offered by scholarship plan dealers. Contributions are pooled and managed collectively, but they come with strict rules and less flexibility.
Let’s take a look at how this plays out in real life.
Case Study: Sophie opens a family RESP for her two children, Ava and Liam. She contributes $2,500 per child per year. The government adds $500 per child annually through the CESG. Over 15 years, Sophie contributes $75,000, and the government adds $15,000. With investment growth, the account reaches over $120,000—enough to cover tuition, books, and living expenses for both kids.
When Ava starts university, Sophie withdraws funds from the RESP. The contributions come out tax-free, and the grants and investment growth are taxed in Ava’s hands. Since Ava has little income, she pays virtually no tax.
RESPs are flexible, too. If your child doesn’t pursue post-secondary education, you have options:
Transfer the RESP to another child (in a family plan)
Roll up to $50,000 into your RRSP (if you have room), keeping the tax shelter
Withdraw the funds and pay tax on the growth, plus return the CESG to the government
RESPs can be opened at banks, credit unions, or online brokerages like Wealthsimple or Questrade. You can choose a self-directed plan and manage the investments yourself, or opt for a managed plan where professionals do the work for you.
And here’s a tip: start early. The earlier you contribute, the more time your investments have to grow. Even small monthly contributions can add up, especially with the CESG boosting your savings every year.
Final Thought
The RESP isn’t just a savings account—it’s a strategic investment in your child’s future. It combines tax-free growth, government grants, and flexible options to help you fund education without sacrificing your own financial goals. Whether you’re a parent, grandparent, or guardian, opening and contributing to an RESP is one of the most impactful financial decisions you can make.
We can help families build RESP strategies that align with their values, timelines, and dreams—so when your child is ready for school, the money is ready too.
