RESP’s Explained: How to Save for Your Child’s Education
Saving for your child’s education isn’t just a “nice to have” anymore, it’s quickly becoming a financial necessity.
In Canada today, the average undergraduate tuition sits at around $7,700 per year, according to Statistics Canada, and continues to rise annually. But tuition is only part of the story. When you factor in housing, food, textbooks, and other living expenses, families are often looking at $20,000–$30,000 per year to support a student.
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Over four years, that adds up quickly. In fact, recent projections estimate that the total cost of a four-year post-secondary education in Canada has now surpassed $100,000, and could climb to nearly $140,000 in the coming years.
And while tuition increases have been relatively modest year-over-year, the long-term trend is clear: education costs continue to rise, and the financial burden is shifting more onto families.
That’s why planning ahead matters.
An RESP (Registered Education Savings Plan) isn’t just a savings account, it’s one of the most effective ways Canadian families can prepare for these rising costs, thanks to tax advantages and government grants designed to help lighten the load.
Backed by the Canadian government, RESPs are one of the most powerful tools available to parents, offering tax advantages and even free money through government grants.
Let’s break it down.
What is an RESP?
A Registered Education Savings Plan (RESP) is a tax-advantaged savings account designed to help pay for post-secondary education. It’s registered with the Canada Revenue Agency, which means it comes with specific rules and benefits.
Here’s how it works:
You (the subscriber) open the account
You name a child (the beneficiary)
You contribute money over time
The government may add grants
The money grows tax-free until it’s withdrawn
When the child enrolls in school, funds are withdrawn as Educational Assistance Payments (EAPs) to help cover costs.
Who is an RESP for?
RESPs are typically used by:
Parents saving for their children
Grandparents or relatives
Even family friends (in some cases)
Anyone can contribute, as long as they have the beneficiary’s permission and Social Insurance Number.
Types of RESPs: Individual vs. Family Plans
When opening an RESP, one of the first decisions you’ll make is choosing between an individual plan and a family plan. Both offer the same tax benefits and access to government grants, but they differ in how the funds can be used.
Individual RESP
An individual RESP is designed for one beneficiary only.
It can be opened for a child
There are no restrictions on the relationship between the subscriber and the beneficiary
Contributions and grants are tied specifically to that one person
This type of plan is often a good option if you’re saving for just one child or want to keep funds completely separate.
According to the Canada Revenue Agency, individual plans allow flexibility in who you name as a beneficiary, regardless of family relationship. (Source: Canada Revenue Agency – Registered Education Savings Plans Guide)
Family RESP
A family RESP allows you to name multiple beneficiaries under one plan, as long as they are related to you by blood or adoption (for example, siblings).
You can add more than one child to the same plan
Contributions are shared across beneficiaries
Funds can be used by any of the children, depending on who pursues post-secondary education
This flexibility can be especially helpful if:
One child doesn’t pursue higher education
Education costs differ between children
You want to simplify savings into one account
The Canada Revenue Agency notes that family plans allow income and contributions to be shared among eligible beneficiaries, provided they meet the relationship requirements. (Source: Canada Revenue Agency – RESP rules and types)
Who can contribute, and how much?
One of the biggest advantages of an RESP is flexibility:
There’s no annual contribution limit
There is a lifetime contribution limit of $50,000 per child
However, contributions are not tax-deductible.
The real benefit? Your investments grow tax-free while inside the account, helping your savings compound over time.
What can RESP funds be used for?
RESP money can be used for a wide range of post-secondary education, including:
Universities
Colleges
CEGEPs (in Quebec)
Trade schools
Apprenticeship programs
Funds can help cover:
Tuition
Books and supplies
Living expenses
The big perk: Government grants
One of the main reasons RESPs are so popular is the free government money.
Canada Education Savings Grant (CESG)
The government adds 20% on contributions, up to $500 per year
Lifetime maximum: $7,200 per child
Lower- and middle-income families may qualify for additional grant amounts.
Canada Learning Bond (CLB)
For eligible lower-income families
Provides up to $2,000 without requiring contributions
In some provinces (like Quebec), additional incentives may also apply.
What happens if your child doesn’t go to school?
This is one of the most common concerns, and the rules are important.
If the beneficiary doesn’t pursue post-secondary education:
Your contributions can be withdrawn tax-free
Government grants (like CESG) must be returned
Investment earnings may be taxed (and could face additional penalties)
However, you may have options:
Transfer the RESP to another child (in a family plan)
Transfer earnings to your RRSP (if you have room)
This flexibility makes RESPs less risky than many people assume.
The Bottom Line
With the cost of post-secondary education in Canada continuing to climb, waiting simply isn’t a strategy. An RESP offers families a practical, flexible way to prepare, combining tax-deferred growth with valuable government grants that can significantly boost savings over time. Whether your child chooses university, college, or a skilled trade, having an RESP in place can ease the financial pressure and open more doors when the time comes.
To get started, consider speaking with your bank or a qualified financial planner or financial advisor, who can help you set up an RESP that fits your goals.
The earlier you start, the more you can take advantage of compounding and free government contributions, because when it comes to education, a small step today can make a six-figure difference tomorrow.
Core CRA / Government Sources: