EDUCATION SAVINGS

Before we talk about money, let's talk about them

The firsts always stand out. First steps, first words, first time they reached for your hand, wrapping all their fingers around just one of yours. In the rush of them, there's so much to imagine.

You'll teach them to ride a bike. You'll pass down the lessons you wish you'd known as a kid. You'll stress over whether or not they'll ace that math test—maybe even more than they will.

And, one day, you'll watch them graduate from school, stepping out into the world to become whoever they decide to be. It's no small step, either. There will be excitement, and joy, and doubt, and you can help make sure that one worry won't weigh on them quite as much: the cost of school.

That's what a Registered Education Savings Plan (RESP) is all about—them.

The RESP is about them. But what does it really do?

You won't need the degree that they'll one day achieve to understand it. A Registered Education Savings Plan (RESP) is a special type of investment account designed to help you save for a child's post-secondary education. Its uniqueness comes from two key benefits:

1. Your money grows tax-free.
   The investments inside the RESP can grow and compound without you having to pay tax on those earnings each year, leaving more money for their education.
2. The government helps you save.
   Through grants, the government deposits extra money into the account. We'll cover how to maximize this more in a moment.

But here's the most important part: it's not just a savings account—it's an investment account. This is a crucial difference.

You don't have to park money in an RESP, you can purchase investments like stocks, bonds, and ETFs, which can grow over time to build a fund that is much larger than what you put in.

This is what allows the account's value to soar past the contribution limit. While your own contributions are capped at $50,000, there is no limit on how much the account can grow from investment returns.

This growth, combined with government grants, is how you turn years of steady contributions into a truly significant education fund.

But wait, since it's an investment, can it lose value?

The honest answer is yes, the value of an investment account will go up and down with the market. Seeing the balance dip can be unsettling, but it's a normal part of investing.

This is why starting early is so powerful. By investing for the long term—over 10, 15, or 18+ years—you give the account plenty of time to recover from any short-term downturns and benefit from the market's historical tendency to grow over time.

How does an RESP work?

There are three people involved in every RESP:

• The Subscriber: This is the person who opens and contributes to the plan. That's you.
• The Beneficiary: This is the child who will one day use the money for their education.
• The Promoter: This is the financial institution that holds the money, like Questrade.

A quick question: Do I have to be a parent to open an RESP?

No, you don't! While parents are the most common subscribers, you can open an RESP for a grandchild, niece, nephew, or even a close friend's child.

You just need the child's Social Security Number (SIN) to get started. It's a great way to be part of the village it takes to raise a child.

But remember: The RESP maximum contribution is per child not per account. So if you open one for your niece, and her parents do too, you can collectively put $50,000 towards that child's RESP (parental consent is, of course, required to do this).

Another quick question: how does the money get paid out?

When your child is enrolled in a qualifying program, you can start taking money out. The withdrawals are split into two types:

1. Post-Secondary Education Payments (PSE): This is the money you originally contributed. Since it was your after-tax money to begin with, you can withdraw it completely tax-free.
2. Educational Assistance Payments (EAP): This is the money that grew in the account, made up of government grants and investment earnings. This payment is sent to the student and is taxed as their income. This is a major benefit, because students typically have very little income and pay little to no tax.

One last quick question: What kind of schooling qualifies?

The money can be used for a wide range of programs at designated post-secondary institutions, including:

• University and college programs
• Trade schools and vocational colleges
• Apprenticeship programs
• Universities and schools outside of Canada

The two numbers you need to know: your RESP contribution limits

According to the RESP rules Canada has set, there are two main numbers to keep in your mind.

1. The lifetime RESP contribution limit: $50,000

This one is straightforward. Over the entire life of the plan, you can contribute a grand total of $50,000 for each child.

You can put it all in at once or spread it out over many years—the total contributions just can't exceed this amount, and doing it all at once impacts your potential government grants!

2. To maximize the RESP, how much should I contribute in 2025?

This is where people often get confused. While there is a lifetime limit, there is no official annual RESP contribution limit. You could, if you wanted, put a large sum into the account in a single year.

However, there is a strategic amount to contribute to get the most from government grants. Which brings us to the best part.

How to get the most RESP grant money possible from the government

The Canada Education Savings Grant (CESG) is the government's way of rewarding you for saving. It's the main differentiator that distinguishes an RESP from, say, a TFSA as a school-savings tool.

• The 20% match: For every dollar you contribute, the government will add 20 cents, up to a maximum of $500 per year.
• To get that full 20%: you need to contribute $2,500 in a year ($2,500 x 20% = $500). This is the most common and effective strategy for maximizing the CESG.
• The lifetime CESG maximum: The total CESG a child can receive is $7,200. If you contribute $2,500 every year, it will take about 15 years to reach this maximum grant—which underscores the value of starting an RESP for your child as soon as you can.
• Catching up: Kids are many things but cheap is not one of them. If you can't contribute the full $2,500 in a given year, you can catch up. Unused CESG contribution room carries forward. You can catch up on one year's worth of grants at a time, meaning you could contribute $5,000 in a year to receive a $1,000 grant.

Depending on your family's situation, there's even more support available. The Additional CESG and the Canada Learning Bond (CLB) are extra grants based on family income, designed to give more support to those who need it most.

Bonus: Extra grants from your provincial government

On top of federal grants, some provinces offer their own programs to help you save even more. It's important to check these rules, as they can sometimes have specific age requirements for eligibility.

• For residents of Quebec
  The Quebec Education Savings Incentive (QESI) is a refundable tax credit that deposits 10% of your annual contributions directly into the RESP, up to $250 per year.
• For residents of British Columbia
  The B.C. Training and Education Savings Grant (BCTESG) is a one-time grant of $1,200. This grant has a specific age window: you must apply for it when your child is between the ages of six and nine. So, as a parent, you need to open an RESP before your child's ninth birthday to ensure they don't miss out on this significant bonus.

If you don't live in B.C. or Quebec, you can still take full advantage of all the powerful federal grants, which form the backbone of the RESP program for all Canadians.

What if they don't go to college right away (or at all)?

You won't know, as you look forward to finding out their first word, whether they'll want to take a gap year (or several years) after high school. They might go through 12 grades and decide that, actually, this whole school thing isn't what they're being called to right now.

You can't know that yet, but you can know this: among the reasons to worry about your kid, this isn't one of them. The money is not lost, and you have both time and options.

1. RESPs can be open for 36 years: That's a long time for them to figure out their major, or if they want to have a major at all. The RESP waits. Once they know their path, their education fund will be there ready to cover the costs.
2. The benefit to taking more time: While you are capped at $50,000 in RESP contributions, it can keep growing indefinitely. So, if they take a break from school, that's just an opportunity for the investments you made to keep growing and better-support their goals.
3. Change the beneficiary: If you have other children, and one of them is 100% sure they won't be doing post-secondary school you may be able to transfer the funds to a sibling's RESP (some conditions apply).
4. Transfer to your RRSP: The earnings you made in the account can often be transferred tax-free to your own RRSP (up to $50,000, if you have the contribution room).
5. Close the account: You can always withdraw the money you originally contributed, tax-free. You will have to return the government grant money, and you'll pay tax on the investment earnings.

How to save for their education the smart way

The goal is to make sure you're able to support their dreams as well as possible—and that's where Questrade comes in. You'll get to…

1. Ditch the costly account fees banks charge

Many of Canada's big banks charge account maintenance fees that slowly chip away at your savings.

For example, TD charges a $25 quarterly maintenance fee on accounts with less than $15,000. That might not sound like much, but over 18 years, that's $1,800 that could have been invested and growing for their future.

At Questrade, there are no annual RESP account fees. Period. Their education fund should be for their education, not for our bottom line.

2. To pick your own investments (and pay $0 commission)

If you want to be hands-on and build your own portfolio, our self-directed RESP is for you. You get two powerful advantages:

• Commission-free trades: You can buy any North American-listed stock or ETF with $0 commissions, making every dollar you put in go entirely towards their education fund.
• Powerful, free tools: You get free access to professional-grade research tools right in our platform. This includes TipRanks, which gives you analyst ratings and insights on thousands of stocks, helping you make more informed decisions for their portfolio.

3. To get a readymade portfolio with proven returns

If you prefer a hands-off approach, you're not alone—and that's where our managed investing accounts come in.

They're called Questwealth Portfolios, and the results speak for themselves. Since it launched in 2014, our Aggressive Growth portfolio has seen a 135.63% return.

How does a Questwealth Portfolio work? It's simple. You'll get matched with an expert-built and managed portfolio of diversified, low-cost ETFs.