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April 22, 2025 | 8 min read
It seems the cost of a child's education only tends to go in one direction: Up. So it's common for parents to consider opening an RESP account when a child is young, to help kickstart saving for that child's educational future.
But what if, when your child becomes an adult, they choose a different path? Might those funds be used for another purpose? The short answer is a qualified "yes". But parents (or the RESP owner) need to be aware of the financial implications related to withdrawing funds from an RESP for non-educational purposes. In some cases, you may be able to keep all of your contributions, and a substantial amount of your investment growth. But it's complicated. There are withdrawal limits and other considerations you will need to think about before moving forward.
First of all, consider whether your child may change their mind and decide they want to attend a qualifying post-secondary college, university or trade school when they're a bit older. In terms of age limits, you can contribute to an RESP account up until a child's 31st birthday. If you opened an RESP the year your child was born, it can remain open – and continue to grow in value – until December 31st of the year your child turns 35 (at that point, the RESP must be closed for good1).
Clearly, a lot can happen to anyone from the ages of 18 to 35. And so it may make sense to keep the RESP fully invested and growing for some time, even though you're not sure if, at the end of the day, you're child will use the funds for a post-secondary education.
Fortunately, if you decide to use the funds for purposes other than education, there’s an easy way to avoid paying some tax on at least a portion of your RESP investment growth. The Canada Revenue Agency (CRA) oversees rules and regulations for RESP contributions and withdrawals. So it's fairly straightforward – if there's enough contribution room in your RRSP account (Registered Retirement Savings Plan) – to transfer up to $50,000 from the RESP to an RRSP, or a spouse’s RRSP (if they have room). Potentially, if you transfer RESP to RRSP accounts, you may save some tax, while also giving your retirement savings a boost.
If you have more than one child – and your other child is under age 21– you have the option to transfer RESP savings, including grants, to that child’s RESP without any tax consequences. However, if they’re over age 21, you may have to pay taxes on any income earned, and return any Educational Assistance Payments (EAPs), including Canada Education Savings Grants (CESGs), Canada Learning Bonds (CLBs) or other provincial grants, to the respective governments.
Note: The financial institution that holds your RESP will require a signed transfer form to complete the transfer according to your instructions. Also, remember that EAPs are taxable in the hands of the beneficiary (student) who usually has little or no other income. As a result, they may pay little to no tax on EAPs.
If your alma mater or another educational institution is close to your heart, you may want to consider donating your RESP investment growth to them. If you do, no taxes would be payable. The whole amount could go to the benefit of the college or university and its students. Also, if you’re donating to a registered university or college, in some cases they may be in a position to issue you a donation receipt for income tax purposes.
When you decide it's time to close your RESP, it may include contributions, grants and investment growth. From a tax perspective, each type of income gets treated differently when you close the account. We strongly recommend you speak with a financial advisor before doing so to understand the financial impacts. Canadian tax rules are complex, so it’s important to have a strategy, and to be careful when making decisions about RESP withdrawals.
Contributions
All contributions can be withdrawn tax-free, as those contributions were already taxed prior to being deposited into the RESP.
Grants
All grants – including Canada Education Savings Grants (CESGs) and Canada Learning Bonds (CLB) – would have to be repaid if the RESP did not support a student in their educational journey. If the grants were used to support the beneficiary student, then the income would be taxed in the hands of the student, which would be a lower tax rate.
Investment growth
You can withdraw any funds earned through investment growth as an AIP (Accumulated Income Payment) if:
Funds earned through investment growth are taxed as income at your regular rate, plus an additional 20% (12% for Quebec residents).
In conclusion, it's important to remember that, while an RESP is a helpful tool to build up savings in a tax-efficient way for a child's education, life has a way of making plans of its own. If you have funds in an RESP, remember they can be used for non-educational purposes, although there are financial impacts to doing so.
As with all financial decisions, we encourage individuals to speak with a financial advisor prior to finalizing a plan. Since an RESP is a registered account, it's important to comply with all withdrawal rules, age limits, and to be informed about the tax implications related to withdrawing or moving funds out of the account.
Visit the Canada Revenue Agency (CRA) website to read more about RESPs:
You can withdraw your money from an RESP, but there are specific rules and considerations to be aware of (especially concerning the withdrawal rules – not for education purposes).
Educational withdrawals
If the beneficiary of the RESP (e.g., your child) is enrolled in a qualifying post-secondary educational program, you can withdraw funds, including contributions you may have made, government grants, or investment earnings, to pay for educational expenses.
Non-educational withdrawals
It's more complicated when it comes to withdrawing from an RESP for non-educational purposes:
Plan closure
An RESP must be closed by the end of the 35th year after it was opened. Any remaining funds must be dealt with according to the above-mentioned rules.
An RESP can be used for many education-related expenses, including:
The RESP provider will distinguish between original contributions and income earned (including grants) to ensure withdrawals get the appropriate tax treatment.
Yes, you can transfer the RESP from one financial institution to another, but there are a few steps to take:
It's not uncommon for account holders to transfer an RESP as they seek better investment options or lower fees at another institution. Just be sure to consult both institutions to ensure a smooth transition.
You might. It depends on a number of factors, and each person’s situation is unique – so there's no easy answer to this question. Certain RESP withdrawal rules must be followed. And so, it's important to plan your withdrawals ahead of taking the action to carefully maximize the benefits and minimize potential tax impacts.
The following withdrawals may be made from an RESP, but the funds trigger taxes owing (in some circumstances), depending on who will benefit from the withdrawal, and the purpose for the withdrawal:
1 The maximum life of an RESP is 40 years and the contribution period is 35 years. These rules apply only to single beneficiary RESPs. For more information, visit: Registered Education Savings Plans (RESPs) - Canada.ca
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