RESP: how it works, the CESG and the Canada Learning Bond

How an RESP works

Three parties are involved. The subscriber opens the plan and contributes. The beneficiary, usually a child, uses the money for education after high school: trade schools, CEGEPs, colleges, universities and apprenticeship programs. The promoter is the financial institution that runs the plan and pays the money out.

Contributions aren’t tax deductible, but investment growth isn’t taxed while it stays in the plan. When the student withdraws grants and growth for school, that money is taxed in their hands, and many students have little other income. You can contribute for up to 31 years after opening the plan, and it can stay open for up to 35 years.

Any adult can open an RESP for a child: parents, grandparents, other relatives or friends. Young adults aged 18 to 20 who were born in 2004 or later can also open one for themselves.

The Canada Education Savings Grant

The CESG adds 20% of the first $2,500 contributed each year, or $500. Families with lower or middle incomes get an extra amount on the first $500 contributed:

• The grant is paid until the end of the calendar year the child turns 17.
• Unused grant room carries forward. If you missed years, you can contribute up to $5,000 in a year and receive up to $1,000 of grant.
• At 16 or 17, a child only qualifies if at least $2,000 was contributed, or at least $100 a year in any four years, before the end of the year they turned 15.
• The CESG usually lands in the plan within 6 to 8 weeks of an eligible contribution.

The Canada Learning Bond

The CLB is for children from lower-income families, and nobody has to contribute a cent to get it. An eligible child receives $500 in their first year of eligibility and $100 for each later year up to and including age 15, to a maximum of $2,000. It’s retroactive, so a plan opened late still collects the past years.

The child must be born on or after January 1, 2004, and the primary caregiver must have filed tax returns and be eligible for the Canada Child Benefit. A caregiver can request the bond until the day before the child turns 18; after that, the young adult has until the day before they turn 21 to claim it. From April 2028, the government plans to open an RESP automatically for eligible children born in 2024 or later who don’t have one by age 4.

Provincial top-ups

• British Columbia: a one-time $1,200 B.C. Training and Education Savings Grant for children aged 6 to 8 with an RESP at a participating institution.
• Quebec: the Québec Education Savings Incentive, a refundable tax credit with a lifetime maximum of $3,600.

Family, individual or group plan?

How to open an RESP

Taking money out, or not using it

When your child enrols, money comes out as educational assistance payments (EAPs): the grants, the bond and the growth, taxed as the student’s income. In the first 13 weeks of a full-time program, EAPs are capped at $8,000 ($4,000 for part-time study). Your own contributions can come out tax-free at any time.

If your child doesn’t continue their education:

• Your contributions are returned to you tax-free.
• The CESG can go to a sibling with grant room; otherwise it’s returned. The CLB is returned.
• Investment earnings paid to you are taxed at your rate plus an extra 20% (12% in Quebec).
• You can avoid that extra tax by moving up to $50,000 of earnings to your or your spouse’s RRSP, if you have the room. This is usually allowed after the year of the plan’s 9th anniversary, once every beneficiary is at least 21 and not eligible for school payments.
• Earnings can also roll over to the beneficiary’s RDSP if they have one. See our RDSP guide.