5 RESP Questions You Need to Know

An RESP, short for registered education savings plan, is a tax-advantaged savings vehicle designed to help families prepare for a child’s post-secondary education. RESPs let your investments grow tax-deferred and offer access to federal and some provincial grants and bonds, making them one of the most effective ways to save for college, university or other eligible training programs in Canada. However, the rules and options around RESPs can be confusing, so below are clear answers to the five most common questions families ask when planning for education costs.

As we head into the back-to-school season, here are the top five RESP questions we hear from families, explained in straightforward terms to help you make informed choices.

1. What can an RESP be used for?

An RESP can pay for a wide range of education-related expenses, not just tuition. Tuition is often the largest cost—Statistics Canada reported average tuition for a full-time undergraduate student in Canada at about $7,360 for the 2024/2025 academic year—but many other costs add up over the course of a program.

RESP withdrawals can cover eligible post-secondary institutions including colleges, universities and many trade and vocational schools, both inside and outside Canada. For studies outside the country, the program typically needs to meet minimum length requirements (for example, a course of study of at least 13 weeks, or shorter minimums for some university programs).

Beyond tuition, RESP funds can be used for: residence or dorm fees, meal plans, textbooks and learning materials, tools and equipment required for training, public transit or other transportation related to study, student fees and activity charges, and necessary technology such as laptops and tablets—provided withdrawal rules are observed and the funds are paid to an eligible beneficiary under the plan.

2. Who can contribute to an RESP?

Any adult can be a subscriber (contributor) to an RESP. Parents most commonly open a plan for their child, and some families open a single family RESP that covers multiple children. Grandparents, aunts, uncles, family friends and other well‑wishers can also contribute, but it’s important to coordinate contributions to avoid exceeding the lifetime cap per beneficiary.

The lifetime contribution limit for a beneficiary is $50,000. If the combined contributions to an RESP exceed that limit, the Canada Revenue Agency applies a penalty tax of 1% per month on the excess amount until it is withdrawn. To avoid unintended penalties, confirm with the plan subscriber before contributing large gifts to an RESP.

3. What are the benefits of saving in an RESP?

Two major benefits make RESPs particularly attractive for education savings: tax-deferred growth and government contributions.

Tax-deferred growth: Investment earnings inside an RESP are not taxed annually. That allows compound growth to work more efficiently over time. Contributions themselves are not tax-deductible, and when money is withdrawn, the taxable portion (investment earnings and government grant income) is generally taxed in the beneficiary’s hands. Because beneficiaries are often students with little other income, the tax payable on those withdrawals is usually small or nil.
Government grants: The federal Canada Education Savings Grant (CESG) generally adds 20% on the first $2,500 contributed each year, up to $500 per year per beneficiary and a lifetime maximum of $7,200. Low-income families may also be eligible for the Canada Learning Bond (CLB), and some provinces offer additional top-up grants. These government contributions significantly boost the effective savings rate in an RESP.

4. How do I withdraw RESP funds the right way?

Withdrawing funds from an RESP in a tax-efficient order helps reduce unnecessary taxes and ensures grant money is used appropriately. A practical withdrawal strategy is:

Withdraw government grants and any grant-earned income first, since unused grant money may need to be returned to the government when a beneficiary does not pursue post-secondary education.
Next, withdraw investment income and growth. This portion can be more heavily taxed if eventually withdrawn for non-educational reasons, so using it for eligible education costs minimizes tax impact.
Finally, withdraw subscriber contributions. Contributions can be returned tax-free to the subscriber once the beneficiary is in school; leaving these funds invested longer allows more time for growth to compound.

There are additional technical details and timing considerations depending on program length, the beneficiary’s income, and provincial grant rules. If you want tailored withdrawal planning, many providers and financial advisors can guide you through the steps specific to your RESP.

5. What happens to RESP money if the child doesn’t go to school?

If a beneficiary doesn’t pursue post-secondary education, there are several options for the RESP and its funds:

Keep the RESP open: Plans can remain open for many years (up to 35 years in many cases), giving the beneficiary time to enroll later while the funds continue to grow tax-deferred.
Change the beneficiary: You can transfer the plan to another eligible child, often without tax consequences, subject to plan rules and age limits for the new beneficiary.
Transfer earnings to an RRSP: In some situations you may be able to move the plan’s accumulated earnings into the subscriber’s or spouse’s RRSP, but this requires available RRSP contribution room and may have limits and tax implications.
Close the RESP: Subscriber contributions are returned tax-free, but government grants generally must be repaid and accumulated earnings withdrawn may be taxable. Some options for earnings include transferring them to another RESP, donating them to an eligible educational institution, or withdrawing them while recognizing any tax owing.

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