The Pros and Cons of Family RESP

A Family Registered Education Savings Plan is a type of RESP that offers a flexible way to save for your kids’ post-secondary education, all in one account. It makes contributions easier to manage and can help you get the most out of government grants. Plus, you have the freedom to allocate funds based on each child’s needs, and any investment growth is tax-deferred.
While there are many benefits to a Family RESP, there are some considerations worth noting as well. Knowing these pros and cons can help you figure out if a Family RESP is the right fit for your family.

What is a Family RESP?

A Family RESP is a flexible education savings plan that lets you save for post-secondary education for multiple kids—all in one account. The beneficiaries must be siblings and related to you in a specific way, but this setup makes it easier to manage contributions and share the funds as needed.

The biggest difference between an Individual RESP and a Family RESP is simple—an Individual RESP is for one child, while a Family RESP lets you save for multiple kids under one account.

With a Family RESP, you can start with one child and add more later, as long as they are siblings and meet the Canada Revenue Agency’s eligibility rules. This setup makes it easier to manage savings for multiple kids while giving you flexibility in how funds are used.

Basically, having a single Family RESP can save you time and potentially cut down on costs compared to juggling separate accounts for each child.

Benefits of a Family RESP

With a family RESP, you may have the following benefits:

You Can Have Multiple Beneficiaries

A Family RESP lets you save for multiple kids—whether they are your children or grandchildren—all in one account. It’s a simple, flexible way to manage education savings while making the most of government grants and investment growth.

One of the biggest benefits is that contributions and grant money can be shared among all the beneficiaries, which is especially handy if you have more than one child.

You Can Flexibly Allocate Your Funds

A Family RESP gives you the flexibility to divide savings and government grants based on each child’s unique education needs. If one child chooses a more expensive program or needs extra financial support, you can easily direct more funds their way—no complicated paperwork is required.

Since contributions and grants can be shared among siblings, any unused funds from one child can go toward another, making sure your savings are fully utilized. This setup helps maximize the benefits of your RESP, ensuring that every dollar goes toward supporting your family’s education goals.

As your kids’ plans evolve, you can adjust fund allocation accordingly, whether they are heading to university, college, or another type of post-secondary program. This flexibility makes a Family RESP a practical and efficient way to save for multiple children’s futures.

You Can Maximize Government Grants

A Family RESP is a great way to get the most out of government grants while saving for your kids’ education. Since contributions and grants are pooled, you can allocate funds strategically among your children, which is especially helpful if you have multiple kids or plan to grow your family.

One key benefit is the Canada Education Savings Grant (CESG)—it can be shared among all the children in the family plan, so you can contribute strategically to maximize the grant money. However, keep in mind that the Canada Learning Bond (CLB) is different; it can’t be shared and is only available to eligible individual beneficiaries.

To get the most out of these grants, you’ll want to plan your contributions carefully, keeping the lifetime limit per child in mind. With the right approach, you can maximize government support and build a solid education fund for your family.

You Get Tax-Deferred Growth

With a Family RESP, your savings can grow tax-free until it’s time to use them for your kids’ education. Since you are not paying taxes on the investment growth right away, your contributions—and any government grants—have more time to compound, potentially giving you a bigger fund when educational expenses come around.

When the money is withdrawn for education, the Education Assistance Payments (EAP) are taxed in your child’s hands—usually at a much lower rate than yours, which helps keep the tax bill minimal. This is one of the biggest benefits of a Family RESP, making it a tax-smart way to save.

The earlier you start, the better, since tax-free growth over the years can add up significantly. By taking advantage of this structure, you can build a strong financial foundation to help cover education costs for multiple children, making a Family RESP a great long-term planning tool.

Sibling Can Share Grant Money

If one child doesn’t use all their grant money in a Family RESP, you might be able to transfer it to another sibling—as long as sibling hasn’t hit their lifetime grant limit. This gives you more flexibility and helps make sure you are getting the most out of every dollar saved for your family’s education.

One of the biggest benefits is the ability to adjust funds based on each child’s needs. If one child decides not to go to college or gets a scholarship, the remaining money—including grants—can be used for their siblings. This flexibility ensures your savings don’t go to waste and are put to the best possible use for your family’s education.

It Offers Simplicity and Cost Savings

A Family RESP can save you money compared to opening separate Individual RESPs for each child. Instead of juggling multiple accounts—with their own fees and paperwork—you only have one to manage, potentially cutting down on administrative costs.

It also makes life easier by keeping all contributions and investments in one place, simplifying record-keeping and overall management. For parents or guardians handling the RESP, this streamlined approach can save both time and effort while still providing flexibility for multiple kids.

Drawbacks of a Family RESP

While there are many benefits, here are some drawbacks to consider:

Beneficiaries Must Be Related

One downside of a Family RESP is that the beneficiaries must be siblings related by blood or adoption, which limits flexibility. That means you can’t include friends, neighbours, or even a godchild in the family plan. If you are looking to save for someone outside your immediate family, you’ll need to consider other options.

This rule can be especially frustrating if you have a blended family or unique family dynamics. If your children aren’t legally considered siblings, they won’t be able to share the RESP, which could mean juggling multiple individual accounts instead.

This restriction can be a big drawback if you want to help with someone else’s education. While a Family RESP is a great option for parents saving for multiple kids, it doesn’t offer the same freedom as an Individual RESP when it comes to choosing beneficiaries.

There Are Grant Sharing Restrictions

Another limitation of a Family RESP is how government grants are shared. When sharing grants each child cannot exceed their $7,200 lifetime limit. So if one child has an excess of $1,000 in grants at the end of their program, but their sibling has accumulated $6,500 in grants, only $700 of the additional $1,000 can be shared with their sibling.

There Are Contribution Limitations

There’s a lifetime contribution limit of $50,000 per child. If you are contributing over many years, you’ll want to track this to avoid going over the cap. Also, each contribution has to be assigned to a specific child in the family plan to ensure they receive the correct amount in grant funding.

And remember, the Canada Learning Bond (CLB)—which provides extra funds for lower-income families—can’t be shared among siblings in a Family RESP. Only the beneficiary who received it can withdraw it as part of their EAP.

Is a Family RESP Right for You?

Choosing between a Family RESP and an Individual RESP depends on your family’s situation and long-term education savings goals. Both options offer great benefits, but one may be a better fit depending on how many kids you are saving for and how flexible you need the plan to be.

Who Benefits Most from a Family RESP?

A Family RESP is ideal for parents with multiple children or grandparents with multiple grandchildren (as long as the grandchildren are siblings, not cousins). If you want to save for more than one child in a single account, this option makes it easier to manage contributions, investment growth, and government grants all in one place.
One of the biggest advantages of a Family RESP is that funds and grants can be shared among siblings, meaning if one child doesn’t need as much (or receives a scholarship), the money can be allocated to another. This flexibility helps ensure your savings are fully used.

It’s also a cost-effective option. Instead of maintaining multiple accounts with separate fees, a Family RESP lets you consolidate everything, saving time, effort, and possibly even administrative costs.

When Might an Individual RESP Be a Better Option?

While a Family RESP is great for families with multiple children, there are situations where an Individual RESP makes more sense:

• If you are only saving for one child, a Family RESP doesn’t offer any added benefit, so an Individual RESP keeps things simple.
• A Family RESP only allows siblings to be beneficiaries. If you are saving for a niece, nephew, godchild, or friend’s child, an Individual RESP is the only option.
• If you want to ensure that each child gets their own separate education fund—without the risk of one child using up more than their share—Individual RESPs provide that structure.

Ultimately, if you are saving for multiple kids, a Family RESP offers great benefits—but the separated structure of an Individual RESP might be the better fit if a child does not have, or is unexpected to have any siblings. When making a decision on what plan would be best for you, remember that a Family Plan can always be added to – even if it only starts with one child – while an Individual plan cannot have any additional children added. It would have to be closed in order to open a Family plan with multiple beneficiaries.

Tips for Maximizing a Family RESP

A Family RESP is a great way to save for multiple children’s education, but to get the most out of it, you’ll need a solid strategy. From smart fund allocation to maximizing grants and planning withdrawals, here’s how to make your savings work harder for your family.

1. Strategically Allocate Your Funds Among Children

One of the biggest benefits of a Family RESP is that you can distribute funds based on each child’s needs. If one child chooses a more expensive program or another gets a scholarship, you have the flexibility to adjust how the savings are used.

To make sure funds are allocated fairly:

• Keep track of each child’s contributions and grants so you know how much is available for them.
• If one child isn’t using their full amount, be mindful of the restrictions—while investment earnings can be shared, unused grant money can only be transferred between siblings up to their maximum limits.
• Plan ahead for each child’s education costs so you are not scrambling to reallocate funds at the last minute.

2. Know the Best Practices for Contributing to Maximize Grants

To get the most out of government grants, you’ll need to contribute wisely. The Canada Education Savings Grant (CESG) matches 20% of contributions, providing up to $500 per year per child, with a lifetime maximum of $7,200 per child.

Here’s how to make sure you are maximizing grant money:

• Contribute at least $2,500 per child per year to get the full CESG match. If that’s not possible, contribute what you can—grants can be carried forward.
• If you are saving for multiple kids, spread contributions strategically so each one gets their share of grant money.

3. Understand the Tax Implications & Withdrawal Strategies

The biggest tax advantage of an RESP is that investment growth is tax-deferred, meaning you don’t pay taxes on earnings until withdrawals begin.

To minimize taxes:

• When withdrawing, prioritize Education Assistance Payments (EAPs) first—these include grants and investment earnings and are taxed in the student’s hands (usually at a low rate).
• Keep personal contributions separate, since they can be withdrawn tax-free at any time.
• Space out withdrawals over multiple years to avoid pushing the student into a higher tax bracket.

Conclusion

A Family RESP can be a great way to save for multiple kids’ education, making it easier to manage contributions, take advantage of government grants, and grow savings tax-free. But it’s not without its challenges—there are rules about who can be included, limits on grant sharing, and some complexities when it’s time to withdraw funds.

Before deciding, think about your family’s needs and how you want to manage your savings. If it fits your situation, a Family RESP can be a powerful tool to help fund your kids’ education while keeping things simple and cost-effective. If you are still uncertain, consider talking to an Education Savings Specialist to help you decide what’s best for your family. And remember, it’s important to start saving early!