If you’re saving for your child’s post-secondary education, you’ve probably heard of a Registered Education Savings Plan (RESP)—one of the best ways to set money aside for their future. But how much can you actually contribute each year? And why does it matter?
RESPs come with specific rules, especially when it comes to maximizing government grants like the Canada Education Savings Grant (CESG). Contribute too little, and you might miss out on free money. Contribute too much, and you could face penalties.
In this guide, we’ll break down RESP contribution limits, explain how to make the most of government incentives, and help you build a solid savings strategy for your child’s education.
How Much Can You Contribute to a RESP Yearly?
There’s no set yearly contribution limit on how much you can contribute to an RESP, but when it comes to government grants, only the first $2,500 in contributions each year qualifies for the Canada Education Savings Grant (CESG). If you’ve got unused grant room from previous years, you may be able to contribute up to $5,000 a year and still get the CESG.
Now, while you can open multiple RESPs for a child, the total lifetime contribution limit is $50,000—and that’s across all their RESPs combined. So, if grandparents, aunts, or uncles have also opened accounts for your child, it’s important to keep track to avoid over-contributing (which can lead to penalties).
What Happens if You Contribute More Than the Limit?
If you over contribute more than the $50,000 lifetime limit for an RESP, it can come with some costly consequences.
First, any excess contributions won’t qualify for the CESG. RESPs qualify for grants up to the first $36,000 deposited so you won’t get any extra government money by depositing extra funds. Plus, any amount over the $50,000 lifetime limit is hit with a 1% tax per month on your share of the extra funds—until it’s withdrawn. That tax needs to be paid within 90 days after the end of the year when the contribution happened.
For example, let’s say you accidentally contribute $55,000 to an RESP—$5,000 over the limit. That extra amount will be taxed at 1% per month, meaning you’d owe $50 every month until you take it out.
Fortunately, RESP government grants, like the CESG and provincial education savings incentives, like the Quebec Education Savings Incentive (QESI), don’t count toward this limit—so they won’t trigger an over-contribution penalty. But if you’re not careful, going over the cap can get expensive, so it’s always a good idea to keep track of contributions across all RESPs for the same child.
If you’re unsure about the rules, it’s a good idea to talk to your RESP provider to make sure you’re making the most of your contributions—without the risk of penalties.
How to Maximize Your RESP Contributions
When it comes to RESPs, free money is the name of the game. The CESG can boost your savings by up to $7,200 per child, but to get the most out of it, you need a solid contribution strategy. Here’s how to make every dollar count:
1. Take Full Advantage of the CESG
The government matches 20% of your annual contributions, but only on the first $2,500 per year. That means contributing at least $2,500 annually ensures you get the full $500 CESG yearly.
And if your family falls into the middle- or low-income bracket, you might qualify for even more CESG money. Depending on your income level, the government could add an extra 10% or 20% on top of the first $500 you contribute each year.
2. Catch Up with Carry-Forward Room
If you didn’t contribute in past years, don’t stress. The CESG lets you catch up by contributing up to $5,000 a year and still receive the 20% match on the first $5,000 ($1,000 CESG total per year max). If you’re behind, this is a great way to catch up on government grants.
3. Prioritize Consistent Contributions
While lump sums add up, a steady savings plan is often more attainable and easier to be consistent with. Here’s why:
- You maximize grant eligibility each year instead of playing catch-up.
- It’s easier on your budget—small, regular deposits hurt less than one big hit.
- You benefit from compound growth by investing earlier rather than waiting to contribute all at once.
Even if you can’t reach $2,500 every year, contributing something regularly is better than waiting for a lump sum. Small, consistent investments add up over time and give compounding interest more time to accumulate.
4. Watch the Lifetime Limit
Each child has a $50,000 lifetime contribution limit, so once you max out the grants and contribution room, you might consider redirecting extra savings into a Tax-Free Savings Account (TFSA) for more flexibility.
