A simple, smart way to make a lasting impact
With the rising cost of education, many grandparents are looking for ways to support their grandchildren’s future — and one of the most effective tools is the Registered Education Savings Plan (RESP). Used wisely, this account can help maximize your contributions, take advantage of government grants, and ease the financial burden on the next generation.
What Is an RESP?
An RESP is a tax-advantaged account designed to help save for post-secondary education. It’s opened by a subscriber (which can be a parent, grandparent, or any adult), and names a beneficiary — the child who will eventually use the funds. A child can be named on more than one RESP, but the total lifetime contribution limit across all accounts is $50,000, tracked by their SIN.
Although RESP contributions aren’t tax-deductible, they grow tax-deferred. When it’s time to withdraw the funds, any growth or government grants are taxed in the student’s hands, not yours — which often means little to no tax is paid since most students have low incomes.
Funds from an RESP can be used for a wide range of education-related expenses. This includes not only tuition, but also textbooks, school fees, laptops, housing, and meal plans. As long as the student is enrolled in an eligible post-secondary program, they can access the money.
How the Government Helps
One of the biggest advantages of an RESP is the Canada Education Savings Grant (CESG). The federal government matches 20% of your contributions up to $500 per year, per child. Over time, this can add up to a maximum of $7,200 in free money.
To receive the full CESG amount, you'd ideally contribute $2,500 per year for 14 years, plus $1,000 in the 15th year. If you’re starting later, don’t worry — you can still catch up. You’re allowed to receive up to $1,000 in CESG per year by contributing $5,000 (effectively covering two years at once). This is especially useful if your grandchild is already a few years old when you begin contributing.
How Grandparents Can Contribute
There are two main ways for grandparents to get involved. If the child’s parents have already opened an RESP, you can simply gift them the money, and they’ll contribute it to the plan. This is the easiest route, especially if the parents are already managing the RESP.
Alternatively, you can open your own RESP and name your grandchild as the beneficiary. This may make sense if you’d like to oversee the investments yourself, or if you want to set up a family plan to include multiple grandchildren. Just remember that the $50,000 contribution limit and $7,200 CESG maximum apply per child, no matter how many RESP accounts they’re named on - so coordination with the parents is important.
Another consideration is whether to contribute a lump sum or make annual contributions. If you have the funds available, a lump-sum contribution can be a valid option, as it simplifies the process by eliminating the need for ongoing annual deposits. However, this approach limits the total amount of government grant money you’re eligible to receive. Ultimately, the decision comes down to whether you prioritize maximizing grant eligibility over time or taking advantage of the potential investment growth that comes with contributing the full amount up front.
Should Grandparents Be the Subscriber?
Being the subscriber gives you full control over the RESP. You decide how the money is invested and when to contribute, and you ensure that the funds are used specifically for education. Many grandparents find it rewarding to watch their contributions in action during their lifetime, rather than leaving behind an inheritance they may never see used.
That said, there are a few things to keep in mind. If you pass away and don’t have a joint subscriber listed, the RESP may become part of your estate, which can complicate things. Also, if your grandchild doesn’t go on to post-secondary and you want to roll unused earnings into an RRSP, you can only do so if you're under age 71 and have contribution room available.
How Withdrawals Work
When your grandchild begins post-secondary studies, withdrawals are categorized in two ways:
• PSE (Post-Secondary Education) withdrawals come from your original contributions. These are tax-free.
• EAPs (Educational Assistance Payments) include investment growth and government grants. These are taxable to the student, who often pays little to no tax thanks to their low income and available credits.
There are withdrawal limits in the first 13 weeks of school to ensure students are genuinely enrolled. Currently, full-time students can receive up to $8,000 in EAPs during this period, while part-time students are limited to $4,000.
A common strategy is to withdraw the EAP portion first — so the taxable amounts are used up while the student’s income is still low — and save the original contributions for later.
What If Your Grandchild Doesn’t Go?
Not all children pursue higher education right away. Thankfully, the RESP is flexible. You can keep it open for up to 35 years, giving your grandchild plenty of time to decide. If they never go, you may be able to transfer the funds to a sibling, change the beneficiary, or withdraw the original contributions (which come back to you tax-free). Investment earnings can also be withdrawn, though this may come with tax and a 20% penalty — unless you qualify to roll them into your RRSP, which is only possible if you’re under 71 and meet certain conditions.
Why This Matters
As a grandparent, contributing to an RESP is more than just financial support — it’s a meaningful investment in your grandchild’s future. You help them avoid student debt, amplify your gift through government grants, and support your own children by easing their financial load.
Plus, it’s a tax-smart move. Unlike investing in a non-registered account in your own name, an RESP allows growth to happen tax-deferred — which means more of your money ends up funding education, not paying taxes.
And perhaps most importantly, you get to see the results of your support. Watching your grandchildren walk across the stage at graduation — knowing you helped make it happen — is a gift no tax break can match.
Interested in setting one up?
We’re happy to guide you through your options and help structure the RESP in a way that works best for your family.
Written by: Dakota Lund-Cornish | Associate advisor – SBW Wealth Management
