RESP: The Education Savings Plan Ottawa Tops Up by 20%
A Registered Education Savings Plan (RESP) is a tax-sheltered account for saving toward a child's post-secondary education. Contributions are not deductible, but growth is untaxed while inside the plan, and the government adds the Canada Education Savings Grant — a 20% match on the first $2,500 contributed each year.
The grant is the reason to open one. The Canada Education Savings Grant (CESG) adds 20% to the first $2,500 you contribute per child per year — $500 — up to a lifetime cap of $7,200 per beneficiary, and lower-income families receive an extra 10-20% on the first $500. Unused grant room carries forward, so a year you skip can be caught up later, but only one previous year's grant can be claimed at a time.
Contribution limits are lifetime, not annual: $50,000 per beneficiary in total, with a 1%-per-month penalty tax on any excess. Because the grant only matches $2,500 a year, the common strategy is exactly $2,500 a year from birth, which reaches the $7,200 grant cap at about age 14 and lets the growth compound for 18 years. Larger lump sums early in life earn more growth but no extra grant.
Families with modest incomes can also receive the Canada Learning Bond — up to $2,000 per child, with no contribution required at all — which is why financial counsellors push RESP sign-up even for households with nothing spare to contribute. Some provinces add their own grants on top.
When the student enrols in a qualifying program, the growth and grant money is paid out as Educational Assistance Payments and taxed in the student's hands, usually at little or no tax because students earn little. Your own contributions come back tax-free. If no child ever attends, the grants go back to the government, the contributions return to you, and up to $50,000 of the growth can move into your RRSP if you have room — otherwise it is taxed plus a 20% penalty.
An RESP can stay open for 35 years, so a gap year or a late start does not forfeit anything, and family plans let siblings share one account and one pool of growth. It sits comfortably alongside a TFSA: the RESP is for the child's education specifically, while a TFSA stays flexible for anything else.
Richify tracks each child's RESP against the $2,500 grant-maximising target and the $50,000 lifetime cap, and projects the balance to the first year of tuition at your fund's return.
