Higher education is one of the most valuable investments you can make in your child’s future—but it’s also one of the most expensive. Between tuition, books, housing, and other fees, the cost of college or university continues to rise. The good news? Starting early and choosing the right savings plan can ease the financial burden and open more opportunities for your child down the road.
Whether you’re in Canada, the U.S., or simply exploring your best options, here’s a beginner-friendly breakdown of the most popular education savings tools—plus tips to help you make the most of them.
Registered Education Savings Plan (RESP) – Canada
A Registered Education Savings Plan (RESP) is a government-supported savings account designed to help Canadians save for a child’s post-secondary education. Contributions grow tax-free, and the federal government adds extra money through grants and incentives.
How it works:
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You can contribute up to $50,000 per child over the life of the plan.
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The Canadian government provides a Canada Education Savings Grant (CESG) of 20% on the first $2,500 contributed each year, up to a maximum of $500 per year (and $7,200 total).
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Additional grants are available for lower-income families through the Canada Learning Bond (CLB).
Tax benefits:
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Contributions are not tax-deductible, but investment earnings grow tax-deferred.
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When funds are withdrawn for education, the earnings and grants are taxed in the student’s hands—typically at a low tax rate.
Best for: Canadian families who want to take advantage of government incentives and start saving early for college, university, or vocational programs.
529 Plans – United States
In the U.S., a 529 plan is a tax-advantaged investment account used to save for education expenses. Each state offers its own plan, and while you don’t have to use your home state’s plan, some offer tax deductions or credits for residents who contribute.
How it works:
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There are two types: Education Savings Plans (for tuition, room and board, etc.) and Prepaid Tuition Plans (to lock in future tuition rates at today’s prices).
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Contribution limits vary by state but are generally high—often exceeding $300,000 in total.
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The funds can be used at most accredited colleges, universities, and vocational schools—and even for K–12 tuition (up to $10,000 per year).
Tax benefits:
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Earnings grow tax-free, and withdrawals are tax-free when used for qualified education expenses.
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Many states offer a tax deduction or credit for contributions.
Best for: U.S. families looking for a flexible, tax-advantaged way to save for education, especially if their state offers tax incentives.
Other Education Savings Options
If you’re looking to supplement an RESP or 529—or don’t qualify for those plans—there are still ways to save effectively for education.
1. Tax-Free Savings Account (TFSA) – Canada
Although not specifically for education, a TFSA allows you to grow investments tax-free and withdraw funds at any time without penalties. This flexibility makes it a useful backup or supplement to an RESP.
Best for: Parents who may need flexibility in how and when the funds are used.
2. Custodial Accounts (UGMA/UTMA) – United States
These accounts let you transfer assets to a minor, which they gain full control of at the age of majority. Funds can be used for education or other expenses, but they lack the tax advantages of a 529.
Best for: Families who want to provide financial support for broader purposes beyond just school.
3. High-Interest Savings Accounts or GICs/CDs
For short-term savings, especially if your child is approaching college age, a high-yield savings account, Guaranteed Investment Certificate (GIC), or Certificate of Deposit (CD) can offer a safe, low-risk way to grow funds without market exposure.
Best for: Conservative savers or those needing access to funds in the near future.
Tips for Making the Most of Your Savings Plan
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Start early: The sooner you begin, the more time your money has to grow through compound interest.
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Automate contributions: Set up monthly transfers to build your savings gradually and consistently.
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Track grant deadlines: For RESP users, contribute before the end of each year to receive the maximum CESG.
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Review investment options: Whether you’re using a 529 or RESP, choose investments that match your child’s timeline and your risk tolerance.
Investing in Education, One Step at a Time
Saving for your child’s education doesn’t have to be overwhelming. With the right tools—whether it’s a RESP, 529 plan, or another account—you can create a plan that fits your budget, goals, and timeline. Start small, stay consistent, and take advantage of available tax benefits and government incentives. The effort you put in today can make a big difference in your child’s future tomorrow.