Millions of Canadians get tax refunds every year. And yet most of it vanishes into short-term consumption — new gadgets, home renovations, perhaps a vacation. But what if that refund could fatten your child’s future, rather than merely deflating your wish list?
The average federal tax refund in 2024 was $2,093, according to Statistics Canada. [Source: CRA Tax Statistics 2025]. Even sweeping a small portion of this (your account at the end of the plan, for instance) into an education savings account in Canada might have huge compounding benefits — all the more so when you take into consideration government grants matching your contributions through an RESP from Canada.
So if you’ve been asking yourself whether you should stick your tax refund in a RESP, the answer isn’t simply yes — it is strategically yes.
What Is An RESP And Why Does It Matter?
A Registered Education Savings Plan (RESP) is a government-approved savings account designed to help Canadians save for post-secondary education. You contribute, the government matches a portion, and the investments grow tax-deferred.
Here’s why it matters:
- You get free government grants just for contributing.
- Growth inside the RESP is tax-sheltered.
- When your child withdraws from school, they’ll pay little to no tax on the money.
It’s a central part of any financial plan for higher education in Canada.
How RESP Government Grants Work In Canada
When you contribute to an RESP, the government steps in to boost your savings through the
Canada Education Savings Grant (CESG).
- The standard grant is 20% on the first $2,500 of annual contributions per child.
- That means you could receive up to $500 per year in grants.
- Families with lower incomes may be eligible for additional CESG top-ups and the Canada Learning Bond.
By simply contributing your tax refund to the RESP each year, you could unlock thousands in RESP government grants in Canada over time.
Why Your Tax Refund Is A Perfect Match For RESP Contributions
There’s a reason this strategy is gaining popularity:
- Your refund is a lump sum of money you don’t count on for monthly expenses.
- It aligns perfectly with the CESG’s annual limit of $2,500.
- It doesn’t disrupt your cash flow or budget.
So instead of spending your refund on short-term wins, you’re putting it toward long-term educational success.
Understanding RESP Contribution Limits
While RESP contributions aren’t tax-deductible like RRSPs, there are clear limits to stay within:
- The annual CESG cap is $500 (based on a $2,500 contribution).
- The lifetime limit for an RESP in Canada is $50,000 per child.
- There’s no annual RESP contribution limit, but exceeding the $50,000 total could result in penalties.
By planning your refund use each year, you can stretch your contributions smartly without hitting the ceiling too soon.
How RESP Investments Grow Over Time
RESPs aren’t just savings—they’re investment vehicles. Funds within an RESP can be invested in:
- Mutual funds
- ETFs
- GICs
- Stocks or bonds (depending on the provider)
Assuming a modest 6% annual return, here’s what happens if you invest your $2,000 refund every year for 15 years:
- Contributions: $30,000
- CESG grants: $7,500
- Growth: ~$17,000
- Total RESP Value: ~$54,500
That’s a tuition-saving powerhouse—all from money that would’ve otherwise been spent.
Using RESP As Part Of A Broader Education Strategy
RESPs are powerful—but even better when combined with:
- Part-time work or co-op programs
- Scholarships and bursaries
- Parental support from the best Life Insurance Plans or investments
Building a well-rounded financial plan for higher education means thinking beyond just tuition. It includes accommodation, travel, and daily living costs too. RESP is just the beginning.
How To Choose The Right RESP Provider
Not all RESP accounts are the same. Here’s what to look for:
- Low fees – Management fees eat into your return.
- Flexible investments – Choose between conservative or growth-focused options.
- Ease of use – Online access, automation, and contribution tracking.
- Transparent rules – Be clear on withdrawal timing and penalties.
Many families choose banks, credit unions, or independent financial advisors based on service level and investment options.
Myths About RESP Contributions And Tax Refunds
❌ “RESPs are only for the wealthy.”
Even small, consistent contributions qualify for full CESG grants.
❌ “You’ll lose the money if your child doesn’t go to school.”
You can name another beneficiary, transfer to your RRSP, or withdraw with tax and partial grant repayment.
❌ “You can’t invest in stocks in an RESP.”
Many RESP providers offer full self-directed investment options.
RESP Withdrawal Rules And What To Expect Later
When your child begins post-secondary education, RESP funds can be withdrawn in two parts:
- Contribution Withdrawals: Tax-free and returned directly to you.
- Educational Assistance Payments (EAPs): Include grants and investment income, taxed in the student’s hands (usually very low).
Planning withdrawals properly ensures you maximize tax efficiency.
RESPs Vs Other Savings Plans: Why It’s Still The Best First Step
Let’s compare RESP to alternatives:
| Plan Type | Tax-Free Growth | Government Grants | Withdrawal Flexibility |
| RESP | ✅ Yes | ✅ Yes (up to $7,200) | ✅ Yes (if education-related) |
| TFSA | ✅ Yes | ❌ No | ✅ High flexibility |
| Savings Account | ❌ No | ❌ No | ✅ Yes |
Conclusion: Why Investing Your Tax Refund In An RESP Just Makes Sense
When does the tax refund hit? You have some options. You could spend it. Save it. Or you could give a tax refund a RESP-ectomy and grow it into something much bigger.
The power of compounding, combined with the government grants available for an RESP and a well-organized education savings account in Canada, makes one refund today worth textbooks, tuition, and more tomorrow.
Don’t just use your refund. Multiply it—with purpose.
Learn More: How To Maximize Your Child’s Education Savings Fund With An RESP In Canada