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RESPs: Get a Head Start on Your Children’s Education


Paying for your children’s post-secondary education out of your regular cash flow could seriously affect your personal savings. A better approach is to start preparing now by saving a little every month, or whenever you encounter extra cash over the years, in a registered education savings plan (RESP). Learn more about the most frequently asked RESP questions.

Brace yourself for the rising cost of post-secondary education

If you’re a medical practitioner, or related to one, you’re likely aware of the increasing cost of post-secondary education. When you add up tuition, other school-related fees, books, accommodation (if the student is living away from home), transportation and various other expenses, the average four-year undergraduate degree could run $60,000 to $80,000—or more. Once you factor in inflation, that figure can be pretty daunting—especially if you have more than one child.

How the RESP keeps getting better

Since the launch of the RESP in 1972, the government has introduced many changes, making it the most popular and easy way to save for your child’s education today. A major advantage of the RESP is that the funds can grow tax-deferred.

In 1998, the government introduced a very attractive enhancement: the Canada Education Savings Grant (CESG). In 2007, the government removed the annual contribution limit of $4,000 and increased the lifetime maximum contribution to $50,000 from $42,000.

Summarizing the key RESP facts

  • What exactly is an RESP? It’s a tax-sheltered investment account designed to help parents, grandparents or others save money for their loved ones’ post-secondary education.
  • Government grants: You will want to maximize the grants the federal government offers to encourage education. The federal government offers the CESG—a 20% grant on the first $2,500 contributed to an RESP each year (or up to the first $5,000 in contributions, if there is carry-forward room available), up to a lifetime maximum grant of $7,200 per child. The Additional CESG and Canada Learning Bond are also available for modest-income families. British Columbia, Saskatchewan1 and Quebec have their own provincial grants.
  • Contributions: Unlike a registered retirement savings plan (RRSP), when you contribute money to an RESP the amount is not tax-deductible.
  • Tax-deferred growth: Like all registered accounts, the investments grow tax-deferred.
  • Withdrawals: Your child (or beneficiary) pays tax on the investment gains when the funds are withdrawn. Presumably, it will be at a lower tax rate.
  • Lifetime maximum: The maximum lifetime contribution for each child is $50,000. There is no annual limit, although the CESG is only available on the first $2,500 in contributions per year, or up to the first $5,000 in contributions, if sufficient carry-forward room exists.

Your MD Advisor can also help clarify how RESPs work and which types of investments can best help you save for your children’s education.

Learn more about MD's investments offering or contact your MD Advisor to find out how we can help.