The best RESP plans in Canada can help pay for your kid’s post-secondary education costs, save them a lot of stress, and minimize the need for hefty student loans.
The average tuition fee per year for undergraduate programs in 2021 was $6,580 as per Statistics Canada. And, for students in professional degree programs like dentistry and veterinary medicine, the average tuition was double or triple that amount.
Given that the cost of Canadian university education is expected to continue to rise, maximizing your child’s Registered Education Savings Plan (RESP) is key.
This post covers the best RESP providers, plans, and investment options in Canada.
What is an RESP?
The funds invested continue to grow tax-free while they remain in the RESP, and returns are only taxed in the hand of your child when they start making withdrawals.
Since most students are in a low tax bracket, the chances are that they pay very little to no taxes.
Perhaps the greatest benefit of an RESP is the ‘free’ grant money you get from the government known as the Canada Education Savings Grant (CESG). You get a 20% matching grant on your RESP contributions up to $500 each year, and up to $7,200 in lifetime benefits.
Best RESP Investment Options
RESPs are versatile and can hold a variety of investment assets including mutual funds, Exchange-Traded Funds (ETFs), Guaranteed Investment Certificates (GICs), individual stocks, bonds, and cash savings.
When you are just starting an RESP for a newborn, it makes sense to have an aggressive or growth-oriented asset allocation.
For example, you could invest using equity ETFs at 80% or more of your portfolio.
As your kid grows older and closer to needing the funds, you want to take a more conservative approach. This is because there is less time to recover from market downturns if you are going to be paying tuition soon.
The table below shows the asset allocation plan I use for my kids:
|Child’s Age||Maximum Equities||Minimum Fixed Income|
|<9 years of age||90%||10%|
Maintaining the asset allocation if you are invested in individual ETFs or stocks requires some ‘elbow grease’ i.e. rebalancing, which is why the best RESP plan options in this post are robo-advisors who do all the work on your behalf.
Best RESP Providers in Canada
When investing your RESP, you need a ‘provider’ who can be a bank, credit union, trust company, or online wealth manager (aka robo-advisor).
An RESP provider invests your RESP contributions as well as any RESP grant you qualify for, including the Canada Education Savings Grant, Canada Learning Bond, and provincial education grants such as the BCTESG.
If you are looking for low-cost RESP investment options without the hassle, an online wealth management company is a great choice. The best RESP providers we have reviewed in Canada are;
1. Wealthsimple RESP
Wealthsimple is Canada’s top robo-advisor with over $10 billion in assets under management.
Its RESP investment account supports both individual and family RESP plans.
If you are a recipient of the CESG, A-CESG, BCTESG, or CLB, these grants are automatically contributed to your Wealthsimple RESP account. Also, there is no minimum amount required to start.
What are the fees?
Wealthsimple charges an annual management fee as follows:
- 0.50%: For investment accounts under $100K (this is equivalent to $5 per $1000 investment per year).
- 0.40%: Accounts exceeding $100K.
The ETFs used to invest in your RESP also include inbuilt fees that are paid directly to the ETF providers. The average ETF fee is 0.20%.
To get started, visit Wealthsimple (link includes a $75 cash bonus).
Parents who prefer to self-direct their kid’s RESP account by choosing the individual investments and rebalancing when required can use the Wealthimsple Trade Platform.
For more information about how Wealthsimple works and its various product offerings, read our review.
2. Justwealth RESP
Justwealth offers a unique RESP plan through its Education Target Date Portfolios.
This RESP account smartly rebalances itself over time and matures into the Justwealth Capital Preservation Portfolio at age 18 when your child enrolls in a post-secondary institution.
For example, if your child was born in 2021, your target RESP date is 2039.
What are the fees?
Justwealth’s annual management fee is:
- 0.50%: Accounts under $500K
- 0.40%: Accounts exceeding $500K
The ETFs used to build your RESP portfolio have an average fee of 0.20% per year.
Justwealth RESP accounts have no minimum account size.
Note that the minimum RESP fee per month is $2.50.
3. Questwealth RESP
Questrade’s managed investment services, Queswealth Portfolios offer RESP plans.
Like Wealthsimple’s RESP, your government grants are contributed to the plan and it earns tax-deferred growth.
What are the fees?
Questwealth RESPs have one of the lowest management fees in Canada:
- 0.25%: Balances between $1K and $100K
- 0.20%: Accounts exceeding $100K
In addition to this, the ETFs used in your portfolio have a fee ranging from 0.17% to 0.22%.
Note that the minimum investment you can make on Questwealth starts at $1,000.
To get started, visit Questwealth Portfolios (you can invest up to $10,000 free for one year using the link).
Those who prefer to manage their kid’s RESP themselves using stocks, bonds, mutual funds, or GICs, can use the Questrade platform.
Learn more about Questwealth Portfolios in this review.
Types of RESPs in Canada
There are three main types of RESP plans:
Individual RESP: An individual RESP plan is opened for just one child. Anyone can choose to open an individual RESP for a child even if they are not the parent.
Family RESP: This RESP account can include multiple children as beneficiaries. If you have more than one kid, a family RESP can allow flexibility in how you share the funds between them. Each beneficiary can still get up to the maximum of $7,200 in government grant money.
Group RESP: This plan is offered by some RESP companies who pool together contributions from unrelated individuals and payout funds on a maturity date that is based on your child’s age.
We recommend staying away from Group RESPs.
Benefits of RESPs
If you need some convincing on whether to open an RESP for your child, here are some of its benefits:
Free government benefits: For each child, you get up to $7,200 in free grant money. These funds grow tax-free and can be used to cover their educational costs in the future.
Tax-deferred growth: The investments in an RESP grow tax-free and no taxes are paid until your child starts to withdraw from it. The maximum amount of $50,000 you can contribute can grow significantly over time.
Flexibility: RESP savings can be used to pay for various kinds of expenses including tuition, accommodation, books, and more. If your child decides not to pursue post-secondary education, you can:
- Use the funds for another child
- Withdraw your contributions
- Transfer the money to your RRSP
How To Open an RESP in Canada
When opening an RESP account, you will need to find a provider (choose from the options above or this government list) and provide them with these details:
- Your Social Insurance Number (SIN)
- The beneficiary’s SIN (your child/ren)
- A government-issued ID
- A void cheque to set up contributions
If opening a robo-advisor account, the process is generally completed online.
For bank RESPs, you can book an appointment online to speak with an advisor at the branch.
RESP Contributions Limit
There is a $50,000 lifetime RESP contributions limit per beneficiary.
You can contribute this amount once or over a period of time (up to 31 years after opening the account).
To qualify for the maximum annual government grant of $500, you must contribute at least $2,500 each year.
Excess contributions over the $50K per child are subject to a 1% penalty tax per month until they are withdrawn.
Learn more about RESP contributions.
How To Make RESP Withdrawal
Funds in RESPs are classified in two ways when you make a withdrawal.
Post-Secondary Education (PSE) payments include withdrawals from the contributions you made. Since your initial contributions are from funds you already paid taxes on, withdrawals are not taxable. You can make a PSE withdrawal at any time and without limits.
Education Assistance Payments (EAP) include investment income earned in the RESP and government grants. There are some rules to keep in mind when making an EAP withdrawal:
- You child must be enrolled in a qualifying or specified educational program
- They can withdraw up to $5,000 of EAP during the first 13 consecutive weeks of enrollment, and any amount after.
- If enrolled in part-time studies, they can withdraw EAP of up to $2,500 for every 13-week period of enrollment.
Best RESP Canada FAQs
If you have more than one child, a family RESP simplifies the process and you can share the money between your children depending on their educational needs.
If you are looking for a hassle-free RESP investment account that also saves you on fees, a robo-advisor RESP like Wealthsimple offers the best RESP plan.
Contribute up to $2,500 per year so you can get the full $500 CESG grant money each year until you max out at $7,200.
All investments carry an element of risk and you can lose money in your RESP if the stock markets suffer a downturn. It is recommended that you take a more conservative approach to your RESP as your kids get closer to starting college.
The lifetime RESP grant money is $7,200. If you also qualify for the Canada Learning Bond, you can receive up to a maximum of $2,000.