RESP (Registered Education Savings Plan)
A Registered Education Savings Plan (RESP) is a tax-sheltered account designed to help Canadian families save for a child's post-secondary education. While contributions are not tax-deductible, investment growth is tax-free inside the account. The federal government provides matching grants through the Canada Education Savings Grant (CESG) — 20% of the first $2,500 contributed annually, up to $500 per year and $7,200 over a lifetime. The lifetime contribution limit is $50,000 per beneficiary. When funds are withdrawn for education, the grants and growth (called Educational Assistance Payments) are taxed in the student's hands, typically at a low rate.
How it works
Because RESP contributions aren't tax-deductible, the account's main tax advantage is different from an RRSP's: your own contributions go in with after-tax dollars and come back out tax-free as a return of capital, while it's the investment growth and CESG grant money — paid out as Educational Assistance Payments — that get taxed, and only in the student's hands, typically at a low rate because students usually have little other income plus their own tuition and basic personal credits to offset it.
The $2,500-per-year CESG matching threshold doesn't need to be hit every single year to eventually get the full grant — unused matching room carries forward, so a family that contributes less than $2,500 in a lean year, or nothing at all, can catch up with a larger contribution later, subject to a $1,000-per-year cap on CESG earned in any single catch-up year.
If the beneficiary doesn't pursue post-secondary education, the RESP isn't simply lost: your own contributions can generally be withdrawn back to you tax-free, growth can sometimes be transferred to your own RRSP if you have available contribution room, and family RESP plans let unused grant-eligible room move between siblings — but the CESG portion itself is usually repayable to the government if it's never used for its intended purpose.
Example: CESG matching in a single contribution year
If you contribute $2,500 to your child's RESP in a year, the government adds a 20% Canada Education Savings Grant — $2,500 x 20% = $500 — for a total deposit of $3,000 that year.
Do this consistently over the years your child is eligible, up to age 17, and the grants can add up to the $7,200 lifetime CESG maximum, on top of tax-free growth on the whole account, even though your own contributions can total up to $50,000 per beneficiary over the plan's lifetime.
Frequently asked questions
Do RESP contributions reduce my taxable income the way an RRSP contribution does?
No. RESP contributions aren't tax-deductible — the benefit comes from tax-free growth inside the account and the government's matching CESG grant, not from an upfront reduction to your taxable income.
What happens to the CESG grant money if my child doesn't pursue post-secondary education?
The CESG portion is generally repayable to the government if it's never used for education, while your own contributions can typically be withdrawn back to you without penalty — check with your RESP provider on the exact repayment mechanics.
Is it risky to open an RESP if I'm not sure my child will go on to post-secondary education?
Not as risky as it might seem: your own contributions come back to you, growth can sometimes transfer to your own RRSP if you have contribution room, and a family RESP plan can shift unused grant-eligible room between siblings.
Related Terms
CESG (Canada Education Savings Grant)
The Canada Education Savings Grant (CESG) is a federal grant that matches 20% of annual RESP contributions, up to $500 per year on the first $2,500 contributed.
RRSP (Registered Retirement Savings Plan)
An RRSP is a government-registered account where contributions are tax-deductible and investments grow tax-free until withdrawal.
TFSA (Tax-Free Savings Account)
A TFSA allows Canadian residents aged 18 and older to invest money and withdraw it at any time without paying tax on the growth.
FHSA (First Home Savings Account)
The FHSA is a registered savings account introduced in 2023 that combines the best features of an RRSP and TFSA for first-time home buyers.