When it’s time to start planning your child’s education after high school, a Registered Education Savings Plan (RESP) is one of the smartest moves many Canadian parents make. By knowing the ins and outs of how RESPs operate, the perks they offer, and the best ways to maximize them, your family can give a serious boost to the money you’ll have for your child’s future schooling.

What is a RESP?

A Registered Education Savings Plan (RESP) is a way for families to save for a child’s post-secondary education while getting some tax perks along the way. The money inside a RESP grows tax-free, which means you won’t have to pay tax on any interest or investment growth until later. When you finally take the money out for school, the earnings are taxed in the child’s name, and since most students earn very little while in school, they may pay little or no tax.

On top of tax-free growth, RESP savers can get a boost from the Canadian government in the form of grants. The most common is the Canada Education Savings Grant (CESG), that contributes 20% (or more in some cases) on the first $2,500 of RESP contributions each year, up to a lifetime maximum of $7,200 per beneficiary. Lower-income families may also qualify for the Canada Learning Bond (CLB) — which provides additional government contributions without requiring personal contributions.

Key Advantages of a RESP

1. Government Matching Funds (“Free Money”)
   By putting cash into a RESP, you’re not just saving for school—you’re unlocking free money from the government. The CESG and CLB can boost your contributions without you having to spend more than you already intend to save.
2. Tax-Deferred Growth
   Interest, dividends, and any investment gains inside a RESP aren’t taxed until you withdraw the cash for school. Because students generally earn very little income, they usually pay very little tax on these withdrawals, making the effective savings strategy even stronger.
3. Flexible Usage for Eligible Expenses
   Once the money is withdrawn for school, it’s not just for tuition. RESP funds can also cover books, supplies, rent, transportation, and any of the little costs that add up for students, making it a versatile education savings tool.

4. Plan for Multiple Programs

Your RESP money isn’t just for university. You can use it for trade schools, community colleges, apprenticeship programs, and other approved post-secondary options.

Things to Watch Out For / Risks

• Lifetime and Contribution Limit: You can’t put more than $50,000 into a RESP for one child, ever.
• Grant Repayment or Clawback: If you pull money out of a RESP and it’s not for school, the government might ask for the grant money back. You could also get taxed and penalized on the interest you earned.
• Timing and Enrolment Requirement: Make sure your child starts an approved program. If they wait too long, you might lose some government grants.

Best Practices for Canadian Parents

• Start Early: Even a small deposit can grow a lot over the years.
• Max Out the CESG: Aim to get the full Canada Education Savings Grant every year so you grab the maximum free money.
• Claim the CLB If You Can: If your child is from a low-income family, you could get the Canada Learning Bond.
• Adjust Contributions Occasionally: Review your savings each year and tweak how much you put in.
• Watch the Plan’s Investments and Fees: Make sure you’re not overpaying and that the investments match your risk level.
• If a Child Won’t Go to School: You can sometimes transfer the RESP to a sibling or withdraw it, following the specific rules to avoid penalties.

By setting up a Registered Education Savings Plan (RESP) now, you can lighten the load of paying for college or university later. Plus, you can take advantage of helpful government money along the way. It doesn’t matter if you lean toward steady bonds or stocks aimed at long-term growth. The big advantage is that the earnings grow tax-free. Add in the grants that the federal and provincial programs might chip in, and you’re in a great position to turn today’s savings into a tomorrow that’s a little easier for your child and your wallet.

At Planet Insurance Canada, our goal is to support families in making smart financial choices, including understanding the role of RESP in your broader financial strategy.