What is an RESP and How Does it Work?

Natalie LeBlanc |

Registered Education Savings Plans (RESPs) are often a key vehicle to saving for your child’s education. RESPs provide tax-deferred investment growth along with access to the Canada Education Savings Grant (CESG) and can be opened as a family or for one child (the beneficiary of the plan and future student).

First, let’s go over some of the basic rules for RESP administration:

  1. Each beneficiary of an RESP is allowed to have $50,000 contributed to their name within their lifetime. There are no longer (as of 2007) annual contribution limits;
  2. Each beneficiary is entitled to the basic CESG of 20% of your annual contribution, up to $500 per calendar year;
  3. The plan owners (in most cases the parents or grandparents) do not have to pay tax on withdrawals of contributions paid out to them[l1] ;
  4. Educational Assistance Payments (EAPs) are withdrawals of the CESG and earnings on the money invested in the RESP which are paid out, and taxable (T4As are issued), to the student;
  5. EAPs are only paid when the beneficiary is enrolled in a qualifying educational program (proof of enrollment is required);
  6. EAPs are limited in the first semester of study (13 weeks) to $5,000 for qualifying full-time programs (at least 10 hours per week) and $2,500 for part-time programs (at least 12 hours per month).


The Canada Education Savings Grant from the federal government is certainly among the most enticing reasons to open an RESP. Other investments may not have such strict withdrawal rules, but the RESP gives access to up to $7,200 in grant money for your child’s education! Of course, there are rules here as well:

  1. CESG is applied only until the end of the calendar year in which the beneficiary turns 17. After this point, it is expected they will begin post-secondary education/withdrawals.
  2. Additional CESG (up to an additional 20% on the first $500 contributed, or an additional $100 per calendar year) is available for families with net income under $98,040.
  3. CESG is only available if you open your RESP under the following conditions:
    1. with at least $2,000 before the year the beneficiary turns 16
    2. with $100 contributed per year in any four years (not necessarily consecutive years) before the year the beneficiary turns 16.


If you are interested in opening an RESP for your child or another family member, give us a call.



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