How RESPs and grants work

Registered education savings plans (RESP) are very popular, in particular because the federal government matches contributions by at least 20%. Some provinces also offer grants for an additional top-up. If you’re a Quebec resident, the federal government will match 20% to 40% of your contributions, while the provincial government will match 10% to 20%. For every $1,000 you contribute per year, the child could get $300 to $600, depending on their family income. This is a great opportunity to turbocharge your child’s savings! If you're planning to help a child through school and you want to learn how to get the most out of your RESP contributions, read on!

To be eligible for a basic federal grant, your RESP contribution must be made by December 31 of the year the child turns 17. Depending on your financial situation and the child's province of residence, you may be eligible for additional amounts.

The basic grant is equal to 20% of what you contribute and is paid monthly into the child's RESP account. Depending on your family income, you might also receive a top-up of 10% to 20% on the first $500 of your annual contribution. The lifetime maximum per child is $7,200.

This federal tax measure provides additional savings support to low-income families. The CLB provides $500 when an RESP is opened, whether anyone makes contributions or not, and then makes annual payments of $100 until the child turns 15, up to a maximum of $2,000.

The Québec education savings incentive (QESI) matches contributions by at least 10%. As with the federal program, depending on your family income, you may also receive a top-up of 10% or 20% on the first $500 in annual contributions. The lifetime maximum per child is $3,600. Saskatchewan offers grants similar to those in Quebec.

Ontario, however, doesn't currently offer RESP grants .

You can contribute up to $50,000 to each child's RESP. However, the maximum value of grants you receive per child is capped at $36,000. If you contribute $2,500 per year ($208.33 per month), you'll reach this amount by the end of the year the child turns 15.

If you contribute to an RESP early on, the money you invest (including grants and investment income) can give you quite the return! By the time graduation rolls around, the amount you've saved may surprise you.

> Calculate the potential return on your RESP contributions

For example, if you live in Quebec and contribute $100 a month starting on your child's second birthday, you'll have saved $33,916 by the end of their high school studies.¹ But if you contribute from the time they're born, you'll have saved $39,622. That's almost $6,000 more, including $3,600 in grants and investment income. If you’re a new parent welcoming a new child into your life, it’s a good idea to take a look at what you can afford to save.

Money saved in an RESP consists of your contributions, any grants and investment earnings.

The money you contributed to an RESP belong to you, and you're not taxed on withdrawals. You could give this money to the student without any tax impact. You could give this money to the student without any tax impact. You could also keep it for yourself or transfer it to your registered retirement savings plan (RRSP), tax-free savings account (TFSA) or tax-free first home savings account (FHSA), if you qualify, or another child’s RESP.

By opening an RESP  and following the advice above, you can help a child you care about pursue their studies and find the career of their dreams. Speak to your advisor about setting up investment and payout strategies that meet your needs.

The grants and investment earnings are paid to the beneficiary. The child must provide proof of enrollment in an eligible post-secondary program (including full-time or part-time college, CEGEP and vocational school programs, subject to certain conditions) to receive educational assistance payments from their RESP. The money can be used to cover any kind of expense, such as tuition, housing, transportation and groceries. The student doesn't need to submit receipts or supporting documents.

> See how you can make smart RESP withdrawals

AIPs are income payments from an RESP, such as accumulated income on contributions, the Canada Education Savings Grant (CESG), Additional CESG, Canada Learning Bond and provincial incentives. If the beneficiary decides not to stay in school and you haven’t replaced them with another eligible beneficiary, you have two options (certain conditions apply): Transfer the AIP to your RRSP or withdraw it. Before you ask for the AIP to be transferred to your RRSP, make sure you have enough RRSP contribution room. If you withdraw the AIP, you’ll have to include it as part of your taxable income and pay an additional 20% tax.