9 Common RESP-Related Questions & Answers

Last updated: September 2023

When my daughter was born seven years ago, I stocked up on diapers, discovered just how little sleep I needed to function — and opened a Registered Education Savings Plan (RESP). Hey, kids are expensive, and a post-secondary education is one of the bigger-ticket items.

Employment and Social Development Canada predicts that in 2032, a student's annual average expenses — including tuition fees, books, shelter, food and transportation — will reach as much as C$32,800. In 2014-2015, full-time students in Canada paid an average of C$16,600 in post-secondary costs, the government agency says.

RESPs have become a popular way to save for those education expenses over time, and like going to school, there's a lot to know about them. Here are nine questions that often come up.

1. Just what is an RESP? In short, RESPs are savings plans that allow your contributions to grow tax free. On top of your own contributions, RESPs are eligible for government grants that can bolster savings. RESPs are set up for a beneficiary (such as a child or grandchild) and by a subscriber (whoever is contributing money to the plan, like a parent or grandparent). Joint subscribers are allowed, as long as they are spouses or common-law partners. Beneficiaries have to be Canadian residents and have social insurance numbers.

2. What's the difference between the two types of plans: individual and family? An individual plan can have only one beneficiary, who doesn't have to be related to the subscriber. A family plan lets the subscriber name more than one beneficiary, add a beneficiary or change the beneficiary at any time. Beneficiaries in a family plan have to be related to the subscriber by blood or adoption. One benefit of a family plan? The funds don't have to be shared equally — helpful if one beneficiary's education costs more than another's or if post-secondary education isn't in the cards for someone named on the plan.

3. How do the government grants work? The most common grant is the Canada Educations Savings Grant (CESG), under which the federal government tops up 20 per cent of the subscriber's annual contribution, to a maximum of $500 per year. In other words, if you contribute $2,500, the CESG would add another $500 for that year. The CESG may be available until the end of the year a child turns 17, and has a lifetime limit of $7,200. While the maximum annual grant amount is $500, there's a carry-forward option that allows you to catch up one missed year at a time, which would allow for a total of $1,000 of potential grant money per year. Think of it as "doubling up" on contributions to catch up on the grant portion. Subscribers must complete a CESG application form (**see more details below) and once approved, deposits are made automatically. (Note: It can take up to 6-8 weeks following the contribution for the grant portion to be deposited into your RESP account.) There are also other federal and provincial grant options, often based on income levels.

4. How much can I contribute, and for how long? Subscribers can contribute a maximum total of $50,000. It's possible to contribute the full amount at one time, but important to remember that a one-time, lump-sum deposit will limit CESG amounts since they're based on annual subscriber contributions. A beneficiary can have more than one RESP, but the total of all RESPs in one name can't exceed that $50,000. A plan can remain open for 35 years, while contributions can be made for 31 years after being opened.

5. It's time for school—what happens now? Only the subscriber can request funds from the account, and needs a beneficiary's proof of enrollment in a post-secondary program or institution to show it's for educational purposes. Withdrawals from subscriber contributions can be sent either to the subscriber or the beneficiary, and are called Post-Secondary Education Payments (PSE). Subscribers have already paid taxes on this money, so it won't be taxed again. Money from grants and accumulated income (from interest, dividends or capital gains) is called an Education Assistance Payment (EAP) and goes to the student. This money will be taxed, but generally at a lower rate since students usually have little or no income. T4A tax slips for these EAP withdrawals would be issued in the student's name.

6. What can RESP money be used for? Funds can generally be used to cover full- or part-time instruction at recognized post-secondary institutions, which are listed on the Government of Canada website. Costs related to school expenses like tuition, books and transportation can all be covered using RESP funds.

7. How much money can be withdrawn? For the EAP portion, which includes the grant money and any investment income, up to $8,000 can be withdrawn during the first 13 weeks of a qualifying program. Limits are lifted after that. For the PSE portion, there are no limitations on withdrawals.

8. What if the beneficiary decides not to go to school? You have a few options. In an individual plan, the subscriber may be able to name another beneficiary. In a family plan, you may be able to direct any government grants and earned income to another beneficiary. You may also be able to transfer the income portion to a Registered Retirement Savings Plan (RRSP) in your name. Finally, you could withdraw the funds, keeping your original contributions, while repaying any grant money and paying tax on any earned income.

9. What investments can I hold in an RESP? Besides cash, generally any investments that are eligible for an RRSP are also eligible to be held in an RESP, such as stocks, bonds,mutual funds, guaranteed investment certificates and exchange-traded funds. U.S. securities are also an option, as long as they're held in Canadian dollars.

Whether your child is thinking pilot or programmer, plumber or pediatrician, RESPs can be an option to help your education savings grow.

** While subscribers can apply for grants, primary caregivers must give their permission by completing an additional form known as an "Annex B." The primary caregiver is the person mainly responsible for the care and upbringing of a child and the one eligible to receive any Canada child benefit payments.

Read more about RESPs here:

Government Grants to Help Grow RESPs

*This article was last updated on December 6, 2018.