How Does an RESP Work?

With my oldest starting high school this year, I’ve realized that his post-secondary education is just around the corner. And in Canada, that’s an expensive prospect!

The average cost of a four-year university degree in Canada is just under $80,000 in total, and like most parents, I don’t want my son crippled by student loans for decades once he graduates.


Luckily, the government does provide some ways for students and their parents to minimize that debt, and one of the most popular is through RESPs.

Your RESP can grow over time. The full name of the government savings plan is “Registered Education Savings Plan”. In the early 1970s, the Canadian government designed the plan as a way to help Canadians save money for post-secondary education.

With the help of government interest, parents, grandparents, or any adult that wants to contribute to a child’s education can deposit money into a child’s RESP.

The world is constantly changing and unlike earlier generations, a post-secondary education is no longer optional. While Canada offers all children the opportunity to attend public primary and secondary schools, post-secondary education is up to parents and/or their child to pay for. Knowing that funds are available in a children’s post-secondary education – RESP is a weight lifted for many families.

From the moment a child is born, well before they can hold a pencil, parents can deposit money for future education (the amount is up to them) into their plan. Wondering just how your money will grow over time? Here’s an example.

Let’s say a family deposited $2500 in small amounts over a period of one year for their child’s education. The interest on the plan changes throughout the year, so let’s say the account earned a simple 5% interest. That adds $500 to the annual total. If you left this in the account (depending on your interest amount) for 18 years, you will have $52,200 non-taxable dollars.

Once your RESP contributions reach $50,000, you have topped out. Contributing to an RESP can also qualify you for the Canada Education Savings Grant (CESG). The CESG matches 20% of your RESP contributions, up to $500 a year, and up to a lifetime maximum of $7,200 per child.

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Are There Different Types of RESPs?

There are three different types of RESPs. All three of them are intended for long term savings for education. RESP funds can be used for training and education almost anywhere. Whether your student wants to study at home or abroad, you are good to go.

  • Individual RESP – This is a single account for a single child. It is good for an only child, God-child, or as a gift for a newborn.
  • Family RESP – This is for a family with multiple children or for a family that does not know how many children they are going to have yet. The money can be used for various children and shared as needed. The amounts do not need to be equal. Keep in mind, the CESG will only contribute a lifetime amount of $7200 per child.
  • Group RESP – A group RESP agrees to buy a pre-set number of plans. You will pay for the group on time as if you were buying 1 RESP even if you are buying 10.

No matter which plan works best for your family, having any type of Registered Education Savings Plan is a great move to help ensure your child’s future success.

Combined with some good lessons on how to save during university and maybe a part-time job for spending money, your student will be able to enjoy their graduation debt-free and ready to start their career!

1 thought on “How Does an RESP Work?”

  1. When my oldest was born I went straight to the bank to open an resp. I was a single mom for awhile so contributions dropped but I got back on track. Every little bit adds up. I can just imagine the costs when they go off to school.

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