Should I Open an RESP for My Child?

The Registered Education Savings Plan combines three engines: tax-deferred growth, the Canada Education Savings Grant — 20 cents added for every dollar on the first $2,500 contributed per child per year, to a lifetime grant maximum of $7,200 — and, for eligible lower-income families, the Canada Learning Bond of up to $2,000 requiring no contributions at all.

When funds are withdrawn for post-secondary education, the grants and growth are taxed in the student's hands — typically at little or no tax. Few savings vehicles stack advantages this generously.

The grant structure rewards consistency: annual contributions of $2,500 from birth capture the full $7,200 by the mid-teens, with every grant dollar compounding tax-deferred for years. Missed years can be partially caught up — one prior year's grant room can be claimed at a time, allowing up to $1,000 of grant on a $5,000 contribution — but grant room stops accruing usefully in the late teens, so late starts leave money on the table permanently. The lifetime contribution limit is $50,000 per beneficiary.

The exit deserves as much attention as the entrance. Withdrawals split into your own contributions (returnable tax-free, any time, to you) and Educational Assistance Payments — the grants and growth — taxed to the student. If a child does not pursue education, family plans allow reallocation among siblings, grants may transfer within limits, and growth can often move to your RRSP if room exists; unused grants return to the government. The plan is forgiving, but only to those who know its doors.