There’s no better feeling as a grandparent than watching your grandchildren grow up and realize their full potential. If you’re interested in supporting your grandchildren in the right direction and helping them pursue their dreams through post-secondary education, you may be wondering whether opening a Family Registered Education Savings Plan (RESP) is possible or whether alternatives are available.
Here’s what you need to know about opening an RESP for your grandchildren.
A Registered Education Savings Plan For the Whole Family
A family RESP can only be opened by a parent, sibling or grandparent and has several additional benefits compared to other savings accounts. First off, the money you save in one can be put towards any grandchild’s education so long as they’re siblings, meaning that you can spread your savings between your grandchildren based on their needs. It can also help account for new grandchildren who are born after the account is open, allowing them to be included in your overall savings plan.
On that note, if you only have one grandchild, a family RESP is often still the best solution for you as it includes all of the benefits of a traditional RESP – it just conveniently future-proofs your plan and gives you more flexibility if you need it. No matter what, you get to enjoy the standard benefits of a registered education savings plan through a family RESP.
Different RESP Accounts Available for Your Child’s Education
In Canada, there are three different types of RESP accounts you can open. Take a look at the comparative table below on how these RESP accounts work:
| Type of RESP Account | Key Features | Best For |
| Individual RESP account |
|
Parents with one child. |
| Family Plan RESP Account |
|
Families with one child or more children who want to contribute to a child’s future. |
| Group RESP Account |
|
Those who want to make contributions on a fixed payment schedule long term. |
Family RESP Accounts at a Glance
- Maximum Contribution Limit Per Child: $50,000 across all RESPs. See how your investments will grow using our RESP calculator.
- Your Money Grows Over Time: In an RESP, your money is invested and grows tax-free, allowing your savings to compound over time.
- Tax-Deferred Savings: Your earnings are only taxed when withdrawn and are done so at your grandchild’s tax rate.
- RESP Account Lifetime: When you open an RESP for a child, the account will remain open for 35 years, allowing children the option of choosing whether they want to pursue post-secondary education as soon as they graduate high school, or later on in life. If your child does not choose to attend school, you can withdraw your funds as accumulated income payments for non-education purposes.
- Government Grants To Support Your Savings: The government gives you an additional 20% on your first $2,500 saved every year per child, up to a lifetime maximum limit of $7,200. Do everything right, and this works out to an additional 20% on your first $36,000 saved per child.
Contributing to an RESP for a Child as a Grandparent
If a RESP has already been opened for your grandchild, you may simply want to contribute to it instead of opening up your own. This way, your grandchild’s savings can be consolidated into a single account, allowing you to make sure you don’t incur any RESP penalties for saving more than $50,000 for each grandchild across plans. This also helps streamline withdrawals and comply with Canada Revenue Agency rules.
Providing a gifted contribution to an RESP set up by the child’s parent is a very popular approach, especially in the early years of parenthood when money can be tight. It’s a great way to provide a gift that lasts a lifetime, instead of, or in addition to traditional gifts.
How to Open an RESP for a Child’s Education as a Grandparent
If you’re a grandparent looking to open an RESP for your grandchildren, here’s what you need to do:
1. Determine eligibility (SINs for all)
Make sure you have a copy of your own Social Insurance Number (SIN) and the Social Insurance Numbers of all grandchildren you wish to open an RESP account for. With a family plan, all beneficiaries must be Canadian citizens and blood relatives. Step-children from former spouses are not eligible for a family RESP.
2. Choose RESP provider (direct or through a financial advisor)
Choose where you would like to open your RESP account. You can open an RESP with a financial institution, investment firm, or Embark. You may be able to apply online or speak with a financial advisor over the phone when opening your RESP account.
3. Decide contribution strategy
As plan subscribers, you’ll be able to determine your own payment schedule for future years. But remember, there is a lifetime contribution limit of $50,000. Any excess contributions into an RESP account will be subject to strict tax implications.
4. Apply for grants (CESG, CLB)
Make sure to apply for government grants throughout your family plan to supplement the money you’ve contributed to your beneficiary.
Are RESP Rules Different For Grandparents?
No, they’re not. Registered education savings plan (RESP) rules are the same for everyone. However, grandparents are one of the only ones, along with siblings and parents, who can create a family RESP for a child.
Can Grandparents Contribute To A RESP?
Yes, anyone can make a gifted contribution to a registered education savings plan (RESP). However, grandparents, along with siblings and parents, are the only ones who can open a family RESP for a child.
If I Open an RESP For My Grandchild, Who Can Contribute To It?
Everyone! A gifted RESP contribution can always be made by anyone, including blood relatives or family friends, to a registered education savings plan (RESP) for a child’s post-secondary education.
Can My Grandchild Have More Than One RESP?
Yes, though we’d recommend trying to consolidate your savings into one plan if possible. This is because the $50,000 lifetime contribution limit per child does not change regardless of how many accounts are opened for them. Should each account exceed $50,000 when combined, you’ll incur heavy tax penalties. Withdrawal rules are also harder to follow when you have multiple accounts.
Can I Use RRSP Funds To Contribute To My RESP?
No, you can’t. All funds in a registered retirement savings plan cannot be moved into a registered education savings plan (RESP) without incurring tax penalties. If funds in your RESP go unused after your grandchild turns 21 or the account has been opened for at least 10 years, you do have the option to transfer them into your RRSP if you are eligible and have the contribution room.
Are RESP contributions tax-free?
No, RESP contributions, investments that grow within an RESP account, and government grants are considered tax-sheltered. This means the beneficiary will only need to pay taxes (regular income tax rate) on these funds once they withdraw the money in the form of an education assistance payment to put toward their post-secondary education, like tuition, housing costs, textbooks, and more. While the beneficiary will need to pay taxes, they’ll be in the lowest tax bracket, which will lower how much they need to pay to the CRA.
What government programs can help me save for my grandchild’s education?
One of the main benefits of opening an RESP account is the ability to collect government grants each year to put toward a child’s future post-secondary school expenses. The beneficiary of an RESP account can collect the following government grants:
- Canada Learning Bond: The Canada Learning Bond provides beneficiaries from low-income families with a lifetime limit of $2000. You do not need to make an RESP contribution to receive this government grant.
- Canada Education Savings Grant: The Canada Education Savings Grant is available to all RESP account holders, regardless of income level. Beneficiaries will receive a lifetime limit of $7,200 and RESP contributions must be made into the account in order to receive this grant money each year.
- Training and Education Savings Grant: This grant is available to those living in British Columbia. Beneficiaries can apply for up to $1,200, which can be used toward a valid post-secondary education institution.
- Quebec Education Savings Incentive: Those living in Quebec may be eligible to receive a tax credit of up to $3,600.
Embark is Canada’s education savings and planning company. The organization aims to help families and students along their post-secondary journeys, giving them innovative tools and advice to take hold of their bright futures and succeed.
