Free Money for Your Kids: How to Get $7,200 from the Government with an RESP
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| Free Money for Your Kids. |
Raising a child in Canada is expensive. But sending them to university or college? That is getting downright unaffordable. Tuition fees are rising every year, and by the time your newborn turns 18, a four-year degree could easily cost over $80,000.
But there is good news. The Canadian government wants to help you save, and they are willing to pay you to do it.
Through the Registered Education Savings Plan (RESP), you can access the Canada Education Savings Grant (CESG). It is essentially "free money" totaling up to $7,200 per child. Here is how to claim every penny.
What is an RESP?
An RESP is a tax-sheltered investment account designed specifically for a child's post-secondary education.
- Tax-Deferred Growth: Investments inside the account grow tax-free. You don't pay taxes on dividends or capital gains while the money is compounding.
- Tax-Efficient Withdrawal: When the money is withdrawn for school (EAP), it is taxed in the student's hands. Since students usually have low income, they typically pay $0 tax.
The Magic: The CESG (20% Instant Return)
The biggest reason to open an RESP isn't just the tax shelter; it is the grant.
For every dollar you contribute, the government adds 20% on top, up to a maximum of $500 per year.
💰 The Optimal Strategy: The "$2,500 Rule"
To maximize the grant, you should aim to contribute $2,500 per year per child.
- You Contribute: $2,500
- Government Adds (CESG): $500 (20%)
- Total Invested: $3,000
That is an instant, guaranteed 20% return on your contribution. No other investment offers this risk-free boost.
Lifetime Cap: The government will give you up to $7,200 per child over the life of the plan.
Started Late? Use the "Catch-Up" Rule
Did you miss the first 5 years of your child's life? Don't worry. You didn't lose that money.
RESP rules allow you to "catch up" on missed grants, one year at a time. You can contribute up to $5,000 per year (to cover the current year + one previous year) and receive $1,000 in grants annually until you are caught up.
Low Income? Get the Canada Learning Bond (CLB)
If your family income is modest (approx. under $56,000 adjusted net income in 2026), you get even more help.
The Canada Learning Bond (CLB) puts money into the RESP even if you contribute $0.
- $500 immediately upon opening the account.
- $100 each year you remain eligible (until age 15).
- Total: Up to $2,000 of completely free money.
Pro Tip: Residents of British Columbia (BCTESG) and Quebec (QESI) have extra provincial grants. Check your eligibility!
What If My Child Doesn't Go to University?
This is the #1 fear parents have. "What if my kid wants to be a YouTuber instead of going to college?"
Don't worry, the money isn't lost.
- Keep it Open: The account can stay open for 35 years. They might go to trade school or college later.
- Transfer to Sibling: If you have a Family Plan, you can move the money to a brother or sister.
- RRSP Rollover: You can transfer up to $50,000 of the accumulated growth (AIP) to your own RRSP if you have contribution room. (Note: You must return the government grants, but you keep your contributions and the investment profit).
⚠️ Warning: Avoid "Group" RESPs
You may be approached by salespeople selling "Group RESPs" or "Scholarship Trusts." Be very careful.
These plans often have high enrollment fees and strict rules. If you miss a payment or your child doesn't attend a qualifying school, you could lose thousands of dollars in fees and earnings. The safest option is a standard Individual or Family RESP at your bank or online broker (like Wealthsimple or Questrade).
Start the Compound Engine Today
The best time to plant a tree was 20 years ago. The second best time is now.
Even if you can't afford the full $2,500 a year, put in something. Even $50 a month gets the 20% match. Opening an RESP is the single most effective financial gift you can give your child—setting them up for a debt-free future.
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