A guide to Registered Educations Savings Plans (RESPs)
Understanding the various aspects of Registered Education Savings Plans (RESPs) is important for making the most of this valuable savings tool. From knowing the contribution limits and available grants to recognizing the benefits and eventual use of the funds, each piece of information can help in planning effectively for a child’s future education. Here’s a quick guide to RESPs to help you get started.
What is an RESP?
A RESP is a long-term savings plan to help save for a child’s education after high school.1 Any adult can open an RESP account for a child – whether it’s a parent, grandparent or even a family friend. The child, known as the beneficiary, will get the money to cover eligible education expenses like tuition, books, supplies, transportation and rent. An RESP can stay open for up to 36 years, giving plenty of time to use the funds.
What types of RESP accounts are available?
There are two main types of RESPs you can open: an individual plan or a family plan. An individual plan is typically used by parents who are saving for one child’s education. A family plan benefits any and all siblings who enrol in an accredited post-secondary program or institution. For family plans, only family members who are related by blood (or adoption) can contribute, whereas any adult can contribute to an individual plan.
What investments can be held in a RESP?
You can hold almost any kind of investment inside an RESP, including mutual funds and exchange-traded funds (ETFs).
How much can be contributed to an RESP?
There is a lifetime maximum of $50,000 per child. Any contributions over that will face a penalty of 1% per month until withdrawn. Your contributions to an RESP may be eligible for the Canadian Education Savings Grant (CESG). The CESG provides additional money to your RESP account based on contributions made. If you’re eligible, you can get up to 20% of the first $2,500 contributed to the RESP, or $500 per year ($1,000 if there is unused grant room from a previous year), up to a cumulative limit of $7,200 per child.2 There are additional grants available for children from middle- and low- income families.3 The annual deadline to contribute is December 31.
What is tax deferral in an RESP?
Although you won’t get a tax deduction for contributing to an RESP, the money in the account can grow tax-deferred until your child heads off to college or university (in other words, an accredited post-secondary program or institution). When they withdraw the funds, some or all of the withdrawal is taxable to the child, who is usually taxed at a much lower rate, since students often have little or no other income. Only government grants and accumulated earnings are taxable, not contributions.
How do withdrawals from an RESP work?
When it comes to withdrawing funds from your RESP for educational purposes, there are three types of funds you can access. These fall into two categories: post-secondary education withdrawals (PSEs), which are the contributions you’ve made, and educational assistance payments (EAPs), which include government grants and any accumulated earnings or growth. Here’s a breakdown:
- capital contributions made by the subscriber (PSEs)
- government grants (EAPs)
- accumulated earnings or growth (EAPs)
You can withdraw PSE funds tax-free.
To withdraw an EAP, the subscriber must ask the RESP promoter. EAPs are considered income for the beneficiary and are taxed when taken from the RESP. To receive an EAP and help pay for education, the beneficiary must be enrolled either part-time or full-time at an eligible school. The subscriber must request the EAP from the RESP promoter, and the beneficiary must provide the RESP promoter with proof of enrolment. If the beneficiary is enrolled in full-time post-secondary studies, they can withdraw up to $8,000 in EAPs during the first 13 consecutive weeks of enrolment. After that, there’s no limit, unless they take a break from their studies and do not re-enrol in a qualifying educational program for 12 months. If the beneficiary is enrolled in part-time studies, the EAP limit is $4,000 for every 13 weeks of enrolment.
The CRA sets an annual limit for EAPs. If the total EAPs requested go over this limit, the promoter will need to check if the expenses are reasonable and might ask for more information.
What steps should be taken when withdrawing from an RESP?
When the time comes to make an RESP withdrawal, these two steps should be taken:
- Make sure the post-secondary school and program are eligible for RESP withdrawals (like a university, college, CEGEP, trade school or other designated education institution).
- Get valid proof of enrolment, such as a confirmation of enrolment and an invoice from the registrar’s office.
What happens if an RESP is unused?
If an RESP isn’t used for the education of the person it’s intended for, here are your options:
- You can change the beneficiary on the account.
- You can close the account. Here’s what’ll happen if you do:
- Any unused government grants must be paid back.
- Money you put in (up to $50,000) can be taken back tax-free.
- Accumulated earnings or growth can either be
- transferred to another registered savings plan if there is contribution room (like an RRSP); or
- withdrawn in cash – you’ll have to pay income tax on this at your marginal tax rate, plus an additional 20%.
An RESP is a great way to save for your children’s education. If you have any questions about existing RESP accounts or are interested in opening a new RESP account, please contact us.
1 Registered Education Savings Plans and related benefits - Canada.ca.
2 It is the beneficiary’s responsibility to keep track of the CESG amount received and repay any amount over the $7,200 limit.
3 The Canada Learning Bond (CLB) is a lifetime maximum of $2,000 for low-income beneficiaries born after January 1, 2004.
Fidelity Private Wealth is a brand name for a business group within Fidelity Investments Canada ULC (FIC) providing private wealth management products and services. Not all services are offered by FIC. Custodial services are offered through Fidelity Canada Clearing ULC, an affiliate of FIC. For discretionary management services offered by Fidelity Private Wealth, FIC acts in its capacity as a portfolio manager.
The statements contained herein are based on information believed to be reliable and are provided for information purposes only. Where such information is based in whole or in part on information provided by third parties, we cannot guarantee that it is accurate, complete or current at all times. It does not provide investment, tax or legal advice, and is not an offer or solicitation to buy. Graphs and charts are used for illustrative purposes only and do not reflect future values or returns on investment of any fund or portfolio. Particular investment strategies should be evaluated according to an investor’s investment objectives and tolerance for risk. Fidelity Investments Canada ULC and its affiliates and related entities are not liable for any errors or omissions in the information or for any loss or damage suffered.
© 2025 Fidelity Investments Canada ULC. All rights reserved. Fidelity Investments is a registered trademark of Fidelity Investments Canada ULC. Third-party trademarks are the property of their respective owners. Used with permission.
