Hi Finance Newsletter:
3rd Edition

🏦 What Is an RESP

Most students don’t fully realize how powerful a Registered Education Savings Plan (RESP) can be. If someone opened an RESP for you (often a parent or guardian), there’s a good chance there’s free government money waiting for you, and it can make a real dent in tuition, books, and living costs.

RESPs are not just savings accounts. They come with government grants that help boost your total education funds, often without any tax penalties when you withdraw the money for school.

📈 How RESPs Work

An RESP is a special savings plan designed to help families save for post-secondary education. You contribute money to the plan, and the government adds extra money on top of what you save.

The two main government incentives are:

🇨🇦 Canada Education Savings Grant (CESG)

  • The government adds 20% of what you contribute each year.

  • That means if $2,500 is contributed in a year, you get up to $500 in free money.

  • The lifetime maximum CESG per beneficiary is $7,200.

📚 Canada Learning Bond (CLB)

  • Eligible children can get up to $2,000 total in CLB contributions.

  • You don’t have to contribute a dime to receive the CLB. The government contributes it automatically if your family qualifies.

One major advantage of RESPs is the tax treatment:

  • Your original contributions are withdrawn tax-free.

  • Government grants + investment earnings are taxed when withdrawn, but they come out as Educational Assistance Payments (EAPs).

  • EAPs are usually taxed in the student’s hands, and most students earn too little to owe income tax, thanks to the Basic Personal Amount.

So even though grants and earnings are technically “taxable,” they often aren’t taxed by the time the student withdraws them for school.

💸 How RESP Withdrawals Are Taxed

🧠 Example: Why This Matters

Let’s say your family contributed $5,000 to your RESP in a year and received $1,000 in CESG (20%). Over a few years, that adds up. When it’s time for school, you might have several thousand dollars available in grants and earnings, and because you’re a student with relatively low income, you likely won’t pay tax on those funds when you use them.

🧾 In Summary

Registered Education Savings Plans aren’t just “extra savings”; they come with government grants that boost funding, potential tax savings when money is withdrawn for school, and the ability to help reduce student debt. Understanding how they work can make a significant difference in how you plan for education costs.

Last Updated: December 12th, 2025
Contributors: Montse Rodriguez, Kyle Le