What does RESP stand for? A beginner’s guide
You want to give your child every opportunity, but let’s be honest: saving for their future education can feel overwhelming. Between everyday expenses and the rising cost of tuition, it’s hard to know where to start. The good news? There’s a savings tool built specifically for Canadian families like yours.
An RESP, which stands for Registered Education Savings Plan, is a special savings account designed to help families save for a child’s post-secondary education. You contribute money, the government adds grants to boost your savings, and your money grows without being taxed until it’s withdrawn. When your child is ready for school, the grants and earnings are taxed in their hands (usually at a lower rate since most students have little income), while your original contributions come back to you tax-free.
What makes RESPs special
An RESP is opened by a subscriber (like a parent, guardian, or grandparent) on behalf of a beneficiary (the child the savings are for). What sets RESPs apart from regular savings accounts is how they grow: through your contributions, government grants, and investment earnings that aren’t taxed while they stay in the account.
The federal government matches 20% of the first $2,500 you contribute each year through the Canada Education Savings Grant (CESG). That’s up to $500 a year and $7,200 over your child’s lifetime. Lower-income families may qualify for even more through the Canada Learning Bond (CLB), which adds up to $2,000 without requiring any contributions from you.
There’s a lifetime contribution limit of $50,000 per child, and your RESP can stay open for 35 years, giving you plenty of time to save and use the funds.
Who can open an RESP
An RESP has two key roles. The subscriber is the person who opens the account and makes contributions. This can be a parent, grandparent, guardian, or even a family friend. The beneficiary is the child the savings are meant to support.
Both the subscriber and beneficiary need a valid Social Insurance Number (SIN) to open the account. You can open an RESP as soon as your child is born, giving you the most time to save and collect grants.
How your money grows
Your RESP grows through three sources: your contributions (the deposits you make), government grants (like the CESG and CLB, plus provincial grants if you qualify), and investment earnings (the growth from how your money is invested, which isn’t taxed while it stays in the plan).
Numbers worth knowing:
- Lifetime contribution limit: $50,000 per child
- CESG: Up to $500/year ($7,200 lifetime maximum)
- CLB: Up to $2,000 for eligible families, no contributions required
- Provincial grants: BC offers a one-time $1,200 grant (BCTESG), and Quebec offers up to $3,600 lifetime through the QESI
Individual plan vs. family plan
When you open an RESP, you can choose between an individual or family plan. An individual plan has one beneficiary, which works well if you have one child or are saving for your own education. A family plan can include multiple children who are related by blood or adoption. This gives you flexibility: if one child decides not to pursue post-secondary education, the funds can be shared with siblings with some limits.
Keep in mind that the $50,000 limit is tracked per child, not per account. So even with a family plan, each beneficiary has their own contribution limit.
What schools and programs qualify
RESP funds can be used for a wide range of post-secondary education in Canada, including universities, colleges, CEGEPs, trade schools, and apprenticeship programs. Some international programs also qualify. Both full-time and part-time studies can be eligible, depending on the program’s duration and study hours. If you’re unsure whether a specific school or program qualifies, check with your RESP provider before requesting withdrawals.
How withdrawals work
When your child is ready for school, you’ll provide proof of enrollment to your RESP provider. Then you can start withdrawing funds in two parts. Your contributions (the money you deposited) come back to you tax-free. The educational assistance payments (EAPs), which include grants and investment earnings, are taxable in your student’s hands.
During the first 13 weeks of full-time enrollment, EAP withdrawals are capped at $8,000. After your student completes 13 consecutive weeks of full-time studies, these limits no longer apply as long as they remain enrolled (within annual CRA thresholds). For part-time students, the cap is $4,000 per 13-week period.
If your child decides not to pursue post-secondary education and you close the plan, the investment earnings may be paid to you as an accumulated income payment (AIP). These are taxed as your income and come with an additional 20% tax (12% in Quebec), unless you transfer them to your RRSP.
Getting started
Opening an RESP is simpler than you might think, and with Embark, you can do it online in about 8 minutes without needing a bank appointment. Here’s how to get started:
- Choose a provider. You can open an RESP through a bank, credit union, or a provider like Embark that specializes in education savings.
- Gather your information. You’ll need your SIN and your child’s SIN to open the account.
- Set up contributions. Decide on a schedule that fits your budget, whether that’s monthly, yearly, or whenever you can. With Embark, there are no minimum contributions.1
- Let your savings grow2. With a managed provider like Embark, your investment portfolio is professionally designed to grow when your child is young and shifts to a preservation model as school gets closer.3
One thing that makes Embark unique: Embark lets friends and family contribute directly to your child’s plan through gifting.4 No more collecting cheques and making deposits yourself.
FAQs
What’s the difference between an RESP and an RRSP?
An RESP is for saving for a child’s education, while an RRSP (Registered Retirement Savings Plan) is for your own retirement. Both offer tax benefits, but they serve different purposes and have different rules for contributions and withdrawals.
What are the benefits of an RESP?
Unlike regular savings accounts, RESPs come with government grants that add to your savings and tax benefits that help your money grow faster. It’s one of the best ways Canadian families can save for their child’s future education.
1 However, Embark may, at its discretion, cancel the Plan if no contributions have been made to the plan within 6 months from enrolment or within thirty-six months after Plan enrolment, the total assets held under the Plan is less than $500, unless the Plan receives CLB grants.
2 Investment returns are not guaranteed. See prospectus for details.
3 Embark Student Plan. See prospectus for details.
4 Embark’s gifting platform is designed to be shared with family and friends to contribute to your RESP. If you wish to top up your plan please login to your account and contribute directly.
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Embark is Canada’s education savings and planning company. The organization aims to help families and students along their post-secondary journeys, giving them innovative tools and advice to take hold of their bright futures and succeed.
