An RESP streamlines education savings. This tax-advantaged plan enables you to invest periodically and assist your kid in pursuing their professional goals without relying on high-interest student loans. Meanwhile, if you are looking for more insights into the RESP scheme, check here.

Participants in an RESP

  • Subscriber: The childโ€™s parent is the one who establishes the RESP and contributes to the account.
  • Promoter. The financial institution holds the RESP that will provide the funds to the kid when they enter post-secondary school.
  • Recipient. The beneficiary of the RESP is the child whose name appears on it and who will ultimately get the amount.

The subscriber opens the RESP and contributes to it periodically. After graduating from high school and enrollment at a recognized educational institute in the qualifying program, the promoter can transfer the funds along with interest earned to the child.

Using an RESP allows a child to delay entering college or educational programs for up to 36 years, saving parents money.

What are the benefits of an RESP?

  • You gain from tax advantages: An RESP is a tax-advantaged account. So your money grows tax-free. Withdrawals are also tax-free. However, investment profits are taxed, and the beneficiary is responsible for paying them. However, considering the child’s income, the taxes will be charged at a lower rate.
  • You get additional contributions from the government: Regardless of your contributions, the government compensates you. There’s nothing to lose, and the extra cash may assist pay for a child’s college education.
  • Your entire financial burden decreases: Higher education costs are growing in Canada. You may accumulate a sizable sum of money by saving consistently over time, alleviating your stress, and providing a chance for your children to grow.
  • You may spend the funds in various ways: The money used to cover the expenses of a full-time course, a part-time degree, or a vocational school, among other things.
  • Over time, your money grows: RESPs provide tax savings and investment growth. Contributions compound over time and provide a higher rate of return than many other traditional savings methods.

How to open an RESP

To open an RESP, you’ll need the beneficiary’s Social Insurance Number. Then, visit your selected financial institution to open the account, such as your credit union or bank. Additionally, the provider assists with the CLB or CESG.

How many different types of RESPs are available?

The plan has three types:

  • Individual RESP: As the name implies, may create this plan for a single person or beneficiary. Anyone can open an account, but only one person can use the funds.
  • Family RESP: This plan allows for the selection of many beneficiaries. All beneficiaries, however, must be family members of the account owner. Therefore, this account is ideal for families with many members.
  • Group RESP: Several persons may open a group RESP. However, it can have only one beneficiary. Many family members may contribute to a group RESP for a single child in this situation.

The contribution limit for RESPs

Contributions to RESPs vary by provider. There is no annual contribution restriction and a lifetime contribution maximum of $50,000. It is particularly critical if your child has many RESPs. You are charged 1% monthly for over-contribution until you withdraw the excess.

Contribution schedules for various RESP providers may vary. Certain providers may need you to follow a set timetable, while others allow you to contribute anytime.

Rules of RESP withdrawals

To withdraw funds from an RESP account, you need to contact the RESP provider. You will be asked for proof of enrolment in a recognized post-secondary institution, either full or part-time, from the beneficiary. They will release the Educational Assistance Payment once confirmed.

Additionally, you have to submit school purchase receipts to show the funds were spent appropriately. Tuition, lab supplies, books, and transportation, among others, are reasonable expenses.

What happens if you don’t use an RESP?

It may happen that your child does not pursue higher secondary education. In that case, you can take the following recourse with the RESP account.

Keep the account as it is

RESPs are open for up to 36 years, even though most students complete high school when they are 18 years old. If the kid does not immediately start higher education, they may return after some time. Check your plan’s terms for any additional requirements, and you can sit on your plan to wait and watch whether your child ultimately chooses to pursue higher education or not.

Changing the beneficiary

This is subject to the terms of your RESP provider’s agreement and the kind of plan selected. On individual and group plans, you can change the beneficiary’s name. If you have a family plan, you probably already have numerous beneficiaries, which means that if one kid is not continuing post-secondary education, the second child may access the funds.

Transfer funds from your RESP to your RDSP or RRSP

Canadian citizens are allowed to transfer upto $50,000 of profits tax-free from the RESP account to the Registered Retirement Savings Plan (RRSP), as long as the plan allows it.

Qualifications include the following:

  • The RRSP should have the limit to make contributions, and the RESP should be at least ten years old.
  • Beneficiaries of RESPs should be over 21 years of age and not actively enrolled in the education.
  • Transferring earnings from an RESP to an RDSP may also be an option if the RESP beneficiary has a serious and prolonged mental disability that prevents them from completing their education.
  • Additionally, you are eligible for this scheme if the RESP is open for 35 years. All beneficiaries should be above 21, and none are in higher education.

Close the RESP

You may discontinue the RESP if the recipient becomes older than 21 years and is not pursuing post-secondary education. However, it is only possible if the account is at least ten years old or more. After you close the account, you are eligible to keep all the contributions. However, you need to return the government funds and bonds as they can only be used for educational purposes.


An RESP has a number of advantages. It allows you to save, grow your money, take advantage of tax benefits, and qualify for government grants. Furthermore, a diverse range of opportunities safeguards your children’s aspirations.

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