RESP: The Best Education Savings Vehicle in Canada

An RESP (Registered Education Savings Plan) is a registered account for education expenses. The key benefit: the Canada Education Savings Grant (CESG) matches 20% of contributions — free government money. With a $2,500 contribution, you get $500 in grants. Over 18 years, maximizing grants can add $7,200+ to your child's education fund.

CESG Grants: Free Money You Can't Refuse

• Match rate: 20% of contributions (you contribute $100, government adds $20)
• Annual max grant: $500/year (on $2,500 contribution)
• Lifetime grant max: $7,200 per child
• Income limits: Grant phases out above ~$173,000 family income; still available but reduced

To maximize grants, contribute $2,500/year per child from birth to age 17. This generates $500 grants annually and hits the $7,200 lifetime cap by age 15–16.

RESP Rules & Eligibility

• Annual contribution limit: $50,000 lifetime per child (not per year)
• Eligible programs: University, college, trade schools, apprenticeships (accredited in Canada or designated internationally)
• AIP rule: If child doesn't attend eligible school, accumulated income (grants + growth) becomes taxable. You get contributions back tax-free, but growth and grants are taxed.
• Grant absorption: Grants must be used for education; withdrawing them early for non-education triggers repayment.

RESP vs. TFSA for Education: The Math

RESP wins if you can contribute $2,500/year to maximize CESG. If you contribute $100/year, skip RESP and use TFSA instead — the 20% grant match is too valuable to pass up. After maxing RESP grants ($2,500/year), additional education savings can go to a child's TFSA or parent's non-registered account.