Late Starting your RESP? Here’s how to Catch UP!

A friend of mine, Gary, recently asked me about registered education savings plans (RESPs) and if it’s too late to get started. Gary’s kids are 14 and 12, and while a bit late in the game, there is still time to take advantage of free government money.

What is an RESP?

An RESP stands for Registered Education Savings Program and is a way for parents to invest in their children’s future education.

Contributions are after-tax (ie. no tax refund), but the account grows tax-free.  While withdrawals are taxable (contributions can be withdrawn tax-free), they are taxed in the student’s hands.  So essentially, providing the student has little income while they are in post-secondary, the withdrawals will face very little tax.

The icing on the cake is receiving the government matching grants on contributions.  Essentially, the government will top up your contribution by 20% to a maximum of $500 which is called the Canada Education Savings Grant (CESG).

Doing the math, that means contributing $2,500 into an RESP will result in receiving the maximum $500 CESG from the government per year and a lifetime maximum of $7200/student.

Related: Low-Cost Discount Brokers for RESPs

Catching up on RESPs

As outlined above, opening an RESP when the child is born and contributing $2,500 would result in $500 in free money from the government.  Doing this every year for 15 years would result in maxing out the government freebie ($7,200 max).

Related:  RESP Investment Strategy

But what if you are a bit late getting started?  The bright side is that if you need to catch up, the government will allow you to carry forward your CESG room.  How much?  You can catch up on the previous years CESG in the current year.

In other words, you can get up to a maximum of $1,000 in CESG in a year.  So essentially, contributing $5,000 will max out the current years and the previous years CESG.

Although RESP accounts have the ability to carry forward contribution room, it’s best not to wait too long as there is a cut off the end of the calendar year that the student turns 17.

Starting Late – Gary’s Situation

Even with kids that are a little older (14 and 12), with the ability to carry forward one year of unused CESG, Gary can still get some CESG money from the government.  How much?

For the 14-year-old, providing that Gary opens an account in 2019, here are the contributions and maximum CESG until age 17.

Contribution CESG
2019 (age 14) $5,000.00 $1,000.00
2020 (age 15) $5,000.00 $1,000.00
2021 (age 16) $5,000.00 $1,000.00
2022 (age 17) $5,000.00 $1,000.00
Total: $20,000.00 $4,000.00

As you can see from the table, providing that Gary can put away $5k/year for the 14-year-old, he can obtain $4k in free CESG money.  $4k in some provinces is enough for a year’s worth of tuition!  This results in a total portfolio size of $24,000 before investment growth.

For the 12-year-old, providing that Gary opens an account in 2019, here are the contributions and maximum CESG until age 17.

Contribution CESG
2019 (age 12) $5,000.00 $1,000.00
2020 (age 13) $5,000.00 $1,000.00
2021 (age 14) $5,000.00 $1,000.00
2022 (age 15) $5,000.00 $1,000.00
2023 (age 16) $5,000.00 $1,000.00
2024 (age 17) $5,000.00 $1,000.00
Total: $30,000.00 $6,000.00

Providing that Gary can put away an extra $5k/year for the 12-year-old, he can obtain $6k in free CESG money.  This results in a total portfolio size of $36,000 before investment growth.

Doing a little math by looking at the tables above, it’s apparent that age 10 is the latest age you can start an RESP and still max out the CESG ($7,200).

RESP Investments

Next question is, how should this money be invested?  As the investment timelines are compressed, I would suggest investing in a conservative manner with a healthy amount of fixed income and cash – especially for the 14-year-old.  With only a few years left until the money is needed, it’s no time to gamble on squeezing a few points out of the market.

Here is a detailed article on maximizing RESP withdrawals.

Final Thoughts

Specific to my friend Gary, even with older kids (14 and 12), opening RESPs (or a family RESP) today and contributing $5k for each child (until age 17) would result in a total of $10k in free CESG money.

Some of the key takeaways from this post are that providing that the child is age 17 or under, it’s never too late to squeeze out a few free CESG dollars from the government.  For the procrastinators (often me), parents can wait until their children are up to age 10 to open an RESP and still get the $7,200 maximum CESG.  However, if possible, I would suggest opening an RESP as soon as the child is born to take advantage of tax-free compounding returns.

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FT is the founder and editor of Million Dollar Journey (est. 2006). Through various financial strategies outlined on this site, he grew his net worth from $200,000 in 2006 to $1,000,000 by 2014. You can read more about him here.
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1 year ago

Hi! Thanks for this article! I would be grateful if you could answer the following question –

My daughter was born outside Canada in the year 2014. We came to Canada in 2020. If I open a RESP account in 2023 & invest 5k every year in it till she turns 18, will I get the $500 for all the previous years including the ones before we came to Canada? 


Kyle Prevost
1 year ago
Reply to  Varun

Hi Varun, my impression would be that you would only start getting RESP contribution room the year your daughter became a resident.

1 year ago
Reply to  Kyle Prevost

Thank you for your reply!:)

3 years ago

I assume the catch up contributions can only be made one year at a time? In my case, when the RESP was opened the maximum was $2000 per year for $400 in grants, but that changed the year after to $2500 for $500 in grants. I never increased the amount so for several years left $100 in grant money on the table. Now I am in a position to catch up, and have time, but I presume I can’t put the total amount at once and the Government will apply the right amount for each carry forward year along the way, but instead can only put $3000 per year now and capture the missing $100 each year?

3 years ago

My son is 10 years old. We just moved to Canada last year and he just got his own SIN this year when we got our PR status. How many years could catch up?

Calvin W.
4 years ago

Sorry I didn’t quite get the table. If you can only have previous 1 year carried forward, then you can only benefit from that 1 extra year’s grant, which is to contribute 5000 to receive 1000. But going forward you can only receive 500 out of 2500 each year. How can you keep contributing 5000 to receive 1000 in the following years?

4 years ago

Hi all. I have my resps with td e funds. I haven’t tracked my yearly investments. My statements do not show total cesg received. Do I call TD to find that?

4 years ago

My original plan is to max out this every year until I got the full government grant. That is, I will contribute $36K, then that’s it.

Recently I am thinking maybe I should also top up the RESP accounts with extra $14K. I didn’t see my kids will not go to universities. The $14K will grow tax free and the kids eventually will pay tax but it’s supposed to be a lower tax than my own anyway.

Would like to know your thoughts on this, FT. Thanks.

4 years ago
Reply to  May

I would recommend putting the additional amount above the grant requirements in your TFSA instead of adding to the RESP. Less restrictions to access. Tax free vs deferred tax.

4 years ago
Reply to  Susan

The reason I wanted to contribute more to RESP is because I maxed out all my registered accounts and still have some to put in my taxable account. I think RESP would be better than taxable.

I know, I am a big saver. Other option is just spend the extra money on a vacation.

4 years ago
Reply to  FT

Once the child goes to university, you can get all the money out if you want. There are a couple of hoops to jump through for the initial withdrawal but once those are met, then you can theoretically collapse the whole thing at once. And the actual school requirements are quite minimal. I don’t have all the rules off the top of my head but I know my oldest qualified with a 3 month trade school program. You can also pull all the principal investment out in one withdrawal and just leave the taxable portion in there if you need the money later or if you have more TFSA room or your kid gets TFSA room. Lots of options. Just have to know and understand the rules.

4 years ago

Oops forgot to hit follow.

4 years ago

We were behind and I hate leaving free money on the table. I discussed with my mother and she agreed to top ours up to the tune of $30,000 with the agreement that we would return the amount to her when we accessed the money. She forfeited her interest on the money but as a very conservative investor she wasn’t making that much in the money and she was happy to contribute that to the boys. Not everyone can afford to do this but if your parents are financially savvy they might agree to help in the way because hey free money.