We all love asking children what they want to be when they grow up.
A teacher. A firefighter. A nurse. A mechanic. An artist. An entrepreneur.
Their answers often change from year to year, but one thing remains the same: we want to help them achieve their dreams.
While we can't predict exactly where life will take them, we can help prepare them for the opportunities ahead. One of the simplest ways to do that is by starting to save for their education early.
What is an RESP?
An RESP, or Registered Education Savings Plan, is a special savings account designed to help families save for a child's education after high school.
What makes an RESP different from a regular savings account is that the Government of Canada helps your savings grow through programs like the Canada Education Savings Grant (CESG).
Here's a simple example:
- You contribute $2,500 in a year
- The government adds 20%, or $500
- Your child's education savings grows to $3,000, before any investment earnings are added
That means you're receiving up to $500 in government grants each year simply by saving for your child's future.
Whether your child chooses university, college, a skilled trade, or an apprenticeship, an RESP can help make those next steps more affordable.
Who Is an RESP For?
RESPs aren't just for young children. They can be opened for people at different stages of life and education, including:
- A newborn or young child
- A school-aged child
- Multiple children through a Family RESP
- A grandchild
- A relative or family friend
- An adult planning to pursue post-secondary education in the future
The only requirement is that the beneficiary has a valid Social Insurance Number (SIN).
Different Types of RESPs
There are two main types of RESPs: Individual and Family. Both offer the same government grants and savings opportunities. The main difference is who the plan is designed for.
Individual RESP
An Individual RESP is intended for one beneficiary. This could be a child, grandchild, family friend, or even yourself. Many people choose an Individual RESP because it's straightforward, with all savings dedicated to one person's education. This option may also be chosen as the one opening the RESP does not need to be directly related to the beneficiary.
Family RESP
A Family RESP allows you to save for more than one child under a single plan, as long as the beneficiaries are related to the account holder by blood or adoption.
This option provides added flexibility for families with multiple children. For example, one child may choose a local college program while another attends university away from home. A Family RESP allows the savings to help support each child's unique educational path.
If one child requires less funding, receives scholarships, or decides not to pursue post-secondary education, another eligible beneficiary may be able to use more of the available savings.
A quick note: While contributions can generally be shared among eligible beneficiaries, government grants are tied to individual beneficiaries and are subject to specific rules and lifetime limits.
To read more about the differences in RESP types, check out this RESP brochure!
Government Grants That Can Help Grow Your RESP
One of the biggest advantages of an RESP is that your savings may be boosted by government grants. Depending on your family's income, there are up to three different grants available.
Canada Education Savings Grant (CESG)
The CESG provides a 20% grant on the first $2,500 contributed annually, up to $500 per year. Over time, a child can receive up to $7,200 through the CESG.
Additional Canada Education Savings Grant
Depending on your family's adjusted net income, your child may qualify for an additional grant on top of the basic CESG. This can provide even more support toward future education costs.
Canada Learning Bond (CLB)
The Canada Learning Bond helps eligible lower-income families save for post-secondary education. Children who qualify may receive up to $2,000 over their lifetime, and no personal contributions are required to receive this benefit.
Together, these programs can make a significant difference in helping families prepare for education expenses.
It's Never Too Late to Start
One of the biggest misconceptions about RESPs is that if you don't start saving when your child is born, you've missed your chance to benefit from government grants.
Fortunately, that's not the case.
If contributing to an RESP wasn't possible in the early years, you're not alone. Between childcare costs, housing expenses, and everyday bills, many families find that saving for education isn't their first financial priority.
The good news is that unused CESG room can carry forward, giving families an opportunity to catch up later.
In fact, you may be able to receive up to $1,000 in CESG in a single year when catching up on unused grant room.
For example, if your child is eight years old and you've never opened an RESP, you haven't lost all of those grant opportunities. By opening an RESP and contributing as your budget allows, you can begin accessing accumulated grant room and work toward maximizing the available grants over time.
The most important thing to remember is that the best time to start was yesterday, but the second-best time is today.
Every family's financial journey looks different. What matters most isn't how much you contribute or when you start. It's taking a step toward helping your child pursue their goals.
What Happens When It's Time to Use Your RESP?
You've opened the RESP. You've made the contributions. You've watched the savings grow.
Parenting gold star earned.
Now comes the exciting part: putting those savings to use.
When your child enrolls in an eligible post-secondary program, funds can begin to be withdrawn from the RESP to help support their educational journey. Depending on the type of withdrawal, payments may come from your original contributions, government grants, or investment growth earned within the plan.
While the withdrawal and tax rules can seem complicated at first, they're designed to help students access their education savings in a tax-efficient way.
Frequently Asked Questions
1. How much does it cost to open an RESP?
The amount needed to open an RESP can vary depending on the financial institution and the type of investments you choose. The good news is that you don't need to contribute a large amount to get started. Even small, regular contributions can add up over time.
2. How much should I contribute to an RESP?
Every family's budget is different. If possible, contributing $2,500 per year allows you to receive the maximum annual CESG of $500. However, any amount you can contribute is a step toward your child's future.
3. Who can open an RESP?
RESPs aren't just for parents. While Family RESPs are typically opened by parents or grandparents and can only include beneficiaries who are related to the account holder by blood or adoption, Individual RESPs offer more flexibility and may be opened by parents, grandparents, guardians, other relatives, family friends, or even adults saving for their own future education.
4. What can RESP funds be used for?
RESP funds can help cover a variety of education-related expenses, including tuition, books, housing, transportation, and other costs associated with eligible post-secondary programs, such as university, college, trade schools, and apprenticeships.
5. What happens if my child decides not to pursue post-secondary education?
You still have options. Original contributions can be withdrawn, and there may be options available for the investment growth within the plan. In some cases, investment earnings may be transferred to an RRSP if eligibility requirements are met. Speak with a financial advisor to understand the options available to you.
6. Can I have more than one RESP for my child?
Yes. More than one RESP can be opened for the same beneficiary. However, contribution and grant limits apply across all plans combined, so it's important to keep track of total contributions.
One Day, "I Want to Be..." Will Turn Into "I Got Accepted."
By opening an RESP, contributing when you can, and taking advantage of available government grants, you're helping create opportunities for your child's future, whatever path they choose to follow.
You may not know exactly where their journey will lead, but you'll know you helped them take the next step.
Note: The information contained in this article was obtained from sources believed to be reliable; however, we cannot guarantee that it is accurate or complete. This material is for informational and educational purposes and it is not intended to provide specific advice including, without limitation, investment, financial, tax or similar matters. The views expressed are those of the author and not necessarily those of Aviso Wealth.
Mutual funds and other securities are offered through Aviso Wealth, a division of Aviso Financial Inc. Unless otherwise stated, mutual funds and other securities are not insured nor guaranteed, their values change frequently and past performance may not be repeated. Unless otherwise stated, mutual funds, other securities and cash balances are not covered by the Canada Deposit Insurance Corporation or by any other government deposit insurer that insures deposits in credit unions.
