What Is an RESP?
A Registered Education Savings Plan (RESP) is a tax-sheltered savings account designed specifically to fund a child's post-secondary education. Like a TFSA or RRSP, investment growth inside the account is not taxed until withdrawal.
But the RESP has something neither of those accounts has: free government money.
The Canada Education Savings Grant (CESG)
The federal government matches 20% of your RESP contributions, up to $2,500 per year, meaning you receive $500 in free grant money per year per child. The lifetime maximum CESG per child is $7,200.
To get the full $500 annual grant, you need to contribute $2,500 that year. If you contribute less, the government still matches 20% of whatever you put in.
Additional CESG for lower-income families: Families with lower household income receive an extra 10–20% on the first $500 contributed each year, worth up to $100 additionally per year.
Canada Learning Bond (CLB)
For qualifying low-income families, the government also provides the Canada Learning Bond: up to $2,000 per child over time, with no contributions required from you. The RESP just needs to be open.
Contribution Rules
- No annual contribution limit (though CESG only applies to the first $2,500/year)
- Lifetime contribution limit: $50,000 per child
- Account can stay open until the child turns 35
- Family plans: One RESP can cover multiple children in the same family
How Newcomers Access It
To open an RESP, the child must have a Social Insurance Number. Newcomer parents should apply for their child's SIN as soon as possible after arriving, the CESG can also be claimed retroactively for each year the account wasn't open (up to a limit), but you need the SIN first.
Permanent residents and Canadian citizens can both open RESPs. Some temporary residents may also qualify, check with your bank.
What Can the Money Be Used For?
RESP funds (including grants) can be used for:
- University and college tuition
- Trade schools and apprenticeship programs
- Some international post-secondary institutions
If the child doesn't pursue post-secondary education, the grants must be returned, but your own contributions come back to you. The investment growth can be transferred to an RRSP (up to $50,000) under certain conditions.
Where to Open One
RESPs are available at all major banks and brokerages. For the best investment options and lowest fees, consider:
- Wealthsimple: RESP available, easy to manage alongside your other accounts
- Questrade: RESP with access to low-cost ETFs
- Your bank: Convenient but check the MER on recommended funds
Ottawa Context
Ottawa has two major universities (uOttawa and Carleton) plus Algonquin College right in the city. Tuition for a four-year Ottawa program can easily run $30,000–$50,000, and that's before housing costs. Starting an RESP early and consistently targeting the $2,500/year mark for maximum CESG means a significant portion of that could be covered by the time your child graduates high school.
Bottom Line
The RESP is one of the clearest wins in Canadian personal finance. A 20% instant return via the CESG, on top of tax-sheltered compound growth, is hard to beat. Open one as soon as your child has a SIN, and target $2,500 per year to capture the full annual grant.
