A Registered Education Savings Plan (RESP) is a type of Canadian registered investing account designed to save for a child’s post-secondary education. In this series of articles we’ll take a look at the basics of these accounts and do some modeling of various contribution and drawdown scenarios. RESPs can be opened up at most Canadian finance institutions including the big banks and discount brokerages.
On a personal level, RESPs are very active in my family right now (as of Summer 2026). We’ve got one child in university, a second just about to start and two more kids in high school. So most of the contribution time has already passed and yet we’re still in a crucial period where we can maximize contributions and grants for the last two children. What is even more interesting is that at the same time we’ve started drawdowns to help the older two fund their education. This has lead to a lot of research, analysis and reflection that I hope to explore through this set of articles.
So let’s start by covering the basics of this account.
Basics
Get ready because RESPs are complicated (see Principle 2 – there is plenty of complexity already in this type of account without adding our own). Despite them being complicated I’m going to try to keep this quick and simple. There is lots of information out there already if you need to dig deeper (see References).
To start, the key parties to an RESP all have special names:
- Subscriber – The person opening an RESP account and contributing money into it. So typically someone like a parent or grandparent.
- Beneficiary – The person receiving the proceeds from the RESP account for education expenses. So typically your child or grandchild.
- Promoter – The organization managing the account. So typically a bank or brokerage.
There are technically three types of RESP accounts:
- Individual – An RESP with only one beneficiary. Nice and simple.
- Family – An RESP with multiple beneficiaries that are all related. Useful with multiple children because the contributions, grants and earnings can be shared between the beneficiaries.
- Group – An RESP that works more like group pension plan. It’s tracked by individual (like an individual account) but pools contributions from multiple investors. We’re not going to talk about these and I don’t recommend them due to their typically very high fees.
Our projections will assume individual accounts to start and then we’ll layer in scenarios with family RESPs later on.
Money Going In
You as the Subscriber, contribute after-tax money to the RESP. Those contributions can be taken out later (see Money Coming Out ). In a self-directed RESP you can use those contributions to buy investments and the proceeds from those investments form the earnings in the account. The earnings grow and compound tax free until they are withdrawn (again see Money Coming Out).
The Canadian government sets a limit of $50,000 in contributions per beneficiary.
The government also offers a number of incentives in the form of grants and bonds to encourage people to open and contribute to an RESP:
- Canada Education Savings Grant (CESG) – The CESG is the big daddy of extra funds you can get from the government for your RESP. The government will deposit a grant into the RESP equal to 20% of your contributions (with a few additional stipulations). The maximum lifetime amount of grants any one beneficiary can receive is $7,200. Each beneficiary can also only receive a maximum of $500 per year in grants. The caveat to that yearly maximum is that if you didn’t get the maximum grant in previous years, you can catch up to one year at a time. For example, if you didn’t contribute anything in one year you could get up to $1,000 in grants the following year. A beneficiary can also only receive grants up to the end of the year they turn 17. This set of rules (max lifetime grants, max annual grant, max one year catch-up and age limit) form a big part of the constraints when trying to optimize RESP contributions.
- Additional CESG – The government offers lower income families an extra 10-20% in grants on the first $500 contributed each year. This is great for many Canadian families but the scenarios we will explore will assume no additional CESG.
- Canada Learning Bond (CLB) – The CLB is an additional amount offered to lower income families. It is a direct contribution from the government of up to $2,000 spread out over time until the child is 15. As with the additional CESG, our scenarios will not explore this additional amount. But if you qualify it is a great way to get some additional savings for your child’s education.
- Provincial Grants – Quebec and British Columbia both offer additional provincial grants. If you live in one of these provinces you should certainly look into these programs but for our modeling we will not assume getting either of these additional grants.
So in summary, for money going in we are looking primarily at contributions, earnings and grants (CESG).
Keep in mind there are a lot of other rules around corner cases for contributions and grants that we won’t cover here as they won’t matter for our modeling.
Money Coming Out
Withdrawals from an RESP account come in two flavours:
- Post-Secondary Education (PSE) Payment – These payments are just returning your original contributions. That means they aren’t taxed because your original contributions were already made with after-tax dollars. It also means they can be withdrawn for the subscriber or the beneficiary. But if you saved this money for your child’s education, you will likely withdraw them for the beneficiary.
- Educational Assistance Payments (EAP) – Everything else you can withdraw from the account other than your contributions comes out as EAPs. That includes investment earnings and government contributions (e.g. CESG, CLB, etc.). These payments are treated as taxable income for the beneficiary. Typically this means low (or even no) taxes if the student is in one of the lower tax brackets.
Yes the names are confusing and don’t really tell you much about the differences. But what can you do?
For the purposes of our modeling, the payment types won’t matter because we’ll be ignoring taxes (see Scenario Wide Assumptions ). But they are important to a general understanding of how to use RESPs. We will talk more about them in the wrap-up as there are some subtle ways to optimize (i.e. minimize) taxes using the two different payment types.
Scenarios
We are going to explore a set of scenarios in the rest of the articles. These scenarios will include the following:
- Front-load Scenarios – In these scenarios, we look at what happens if we theoretically fund an RESP in a couple of optimized, front-loaded ways. These scenarios are about gettng as much money into the RESP as quickly as possible to maximize the amount of time investment gains have to compound. This has also been called “super-funding” an RESP.
- Realistic Scenarios – The Front-load Scenarios are an interesting exercise, but based on personal experience they aren’t very realistic. I don’t know many young families that have enough free cash to put tens of thousands of dollars into an RESP as soon as their children are born. So in these scenarios we’ll explore contributions and drawdowns with a more gradual ramping up of contributions, reflecting a family’s ability to contribute more as their income grows over time.
- Family Plan Scenario – The first set of scenarios will use a single child to keep things simple. But a Family RESP is a great option to pool money for multiple siblings. We’ll look at a typical family scenario that extends the models to multiple children.
Scenario Wide Assumptions
All of the scenarios use the following assumptions (building on our standard modelling assumptions):
| Parameter | Value | Comments |
|---|---|---|
| Inflation Rate | 2.1% | Per FP Canada at time of publication |
| Stocks Return Rate | 6.0% | Rough estimate net of fees for diversified stock portfolio using low-cost ETFs |
| Bonds Return Rate | 3.0% | Rough estimate net of fees for diversified bond portfolio using low-cost ETFs |
| Total Education Costs | $101, 139 | Average from Embark study (as of 2025). Embark is a provider of group RESP accounts. While I’m happy to borrow the data from their article, I don’t recommend their products. |
| Contributions | Varies by Scenario | Varies by Scenario |
| Withdrawals | $12,642 per academic term | Calculated by breaking Total Education Costs above into 8 terms of a standard 4-year university program in Canada. The withdrawals will also assumes child goes to post-secondary education immediately after high school. |
| Assset Allocation | 100% stocks, 0% bonds for first 11 years Thereafter shift by 10% per year until reaching 10% stocks, 90% bonds | Selected for aggressive growth early in account followed by a conservative glide path until post-secondary education starts. |
| Taxes | N/A | Mostly for the purposes of keeping the model simple, the withdrawals we need to make based on the estimated education costs don’t account for taxes. Depending on the split between RESP payments types (PSE vs. EAP) and the student’s other income there is a good chance they will pay little or no tax on RESP withdrawals anyways. |
Like any personal finance modeling situation, these assumptions could vary widely based on your personal situation including risk tolerance and expected education costs.
But for purposes of comparing different scenarios, selecting some reasonable assumptions and using them across all scenarios allow us to compare outcomes under the same conditions.
