Understanding RESPs – Investing in your child’s education

March 14, 2016

Investing in your child’s education.

The Basics

A Registered Education Savings Plan (RESP) is a special savings account designed to help families save for their children's post-secondary education. Contributions made to an RESP grow tax free until the beneficiary enrolls in a qualifying post-secondary program. To open an RESP, you will need the child’s birth certificate and Social Insurance Number. At the time an RESP is opened, the child must be a resident of Canada. Below are the basics to help you understand the important terms and facts about RESPs.

Key terms

  • Beneficiary. The student using the RESP for their post-secondary education
  • Subscriber. The person who opens an RESP on behalf of the beneficiary

Key facts

  • Lifetime contribution limit for each beneficiary is $50,000. There is no annual limit
  • Grants and income grow tax free in an RESP until withdrawn and are taxed in the hands of the beneficiary, who will typically have little income as a student and will likely pay minimal or no tax on the withdrawal

Plan types

Individual RESP

  • Limited to one beneficiary, who may or may not be related to the subscriber
  • No age limit for the beneficiary to be added to the plan
  • Recommended for single-child families, families with large age differences between children, and subscribers who wish to set up an RESP for someone to whom they are not related

Family RESP

  • Allows for one or more beneficiaries who are related by blood or adoption to the subscriber(s)
  • Beneficiary must be under age 21 to be added to the plan
  • Ideal for families with more than one child, as the Canada Education Savings Grant (CESG) and income are shared by all beneficiaries in the plan1

Canada Education Savings Grant (CESG) 2

RESP savings can be supplemented with government education savings initiatives, including the CESG.

Key facts

  • The basic CESG provides 20 cents on every dollar you contribute, up to a maximum of $500 on an annual contribution of $2,500 contributed to an RESP on behalf of an eligible beneficiary
  • There is a maximum grant of $7,200 for the plan’s lifetime
  • If you cannot make a contribution in any given year, you may be able to catch up in future years
  • This grant is available up until the end of the calendar year in which the child turns 17


Source: AGF Investment Inc. Data assumes a $2,500 annual contribution for a period of 20 years. For illustrative purposes only.

For complete CESG guidelines, visit Employment and Social Development Canada.

Finally, it’s important to note that some provinces offer additional savings incentives for their respective residents. To learn more, visit the federal government’s CanLearn website.

For more information on investing in your child’s education, talk to your financial advisor or visit AGF.com/RESP.


1 Additional Canada Education Savings Grant (CESG), Canada Learning Bond (CLB), British Columbia Training and Education Savings Grant (BCTESG), Quebec Education Savings Initiative (QESI) and Saskatchewan Advantage Grant for Education Savings (SAGES) can only be paid if all beneficiaries of the family RESP are siblings. 
2 Payments made to an RESP under the Canada Education Savings Act or under a designated provincial program are not included when determining if the lifetime contribution limit has been exceeded.

The contents of this Web site are provided for informational and educational purposes, and are not intended to provide specific individual advice including, without limitation, investment, financial, legal, accounting or tax. Please consult with your own professional advisor on your particular circumstances.

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