Written by Brayden Grant CIM
Cornerstone Financial Management Inc.
Published July 25, 2025
There is a lot of information available on what an RESP is and what you need to know when setting one up. One often overlooked critical component to using the RESP is understanding the best strategies to start pulling the money out. We wanted to share a brief analysis on what to consider when you approach this final stage.
As a reminder, RESPs can be used for children, family members, or relatives that plan on pursuing any post-secondary education. Investments within a RESP grow tax-deferred until it’s time to take the money out. You also get the benefit of government grants (and learning bonds for low-income families) annually, up to a set limit. RESPs are a perfect long-term tool to use if you want your child to pursue a post-secondary education.
Let’s move ahead several years; You opened a RESP 18 years ago; you’ve maxed out your contributions and received full grant money. Your child has been accepted into a university and you want to help pay their way through.
What are your next steps?
- First, you need a Proof of Enrollment slip or any documentation that proves your child has upcoming educational expenses.
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You then decide you need $20,000 to pay for the first year of school.
- You sell a portion of the investments in the account and get to a question – do you choose EAP (Educational Assistance Payments) or PSE (Post-Secondary Education) withdraws?
A common goal is to try to minimize your taxes. You might have made significant investment returns over the life of the RESP as it has grown tax deferred. When you take money out of the RESP, it is taxed in the hands of the beneficiary (the child). Therefore – if your child is in the bottom tax bracket and pays no taxes, you want to draw the portion of the RESP that is taxable – the EAP.
- Try to maximize taking the taxable portion of the RESP out when your child is either not working or is in the lowest tax bracket, so they end up paying no or minimal taxes!
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Using up the EAP early should be the focus once you start drawing from the RESP.
- The EAP is the portion of money that earned investment returns, as well as the government grants.
Once the EAP is used up for the child, you can then start to use the PSE. The PSE is the money you have personally added to the RESP (up to $50,000 in 2025). This money is called return of capital, so you are simply getting the money back you added in the past tax free.
Sometimes, a primary focus is on setting up accounts. However, often overlooked (and just as important), is knowing when to take money out of them. We wanted to shed light on a high-level overview of using up the money in a RESP. Keep in mind there are several strategies in building wealth in a RESP like timing of contributions or withdrawals, investment strategies, tax planning, and potential transferring if there are leftover assets in the RESP. Using an advisor can be a sizeable benefit (no bias here….) if you want to explore more customizable options. RESPs are a fantastic tool that should be used if you plan on helping your child pursue an education and start their careers financially better off.