RESP vs TFSA or RRSP for Education Savings

The cost of post-secondary education goes high every year; as a result, the Canada government established different accounts for enables the parents or grandparents to save money for their child, grandchild or relatives. Two common accounts are Registered Education Savings Plan (RESP) and Tax-Free Savings Accounts (TFSA).  Which account is better for educational savings? First, let’s compare the TFSA and RESP.

Registered Education Savings Plans (RESPs)

This is exceptional savings account for parents who want to save for their children’s high school education.  Parents, guardians and other parents can open plans for their child, grandchild and child of relatives and allow adults to obtain their RESP tax-free. RESPs can either require a specific monthly contribution or deposit money into an RESP account as you want.  RESPs take 35th year to expire. After that, the funds deposited grow tax-free, and the savings supplemented by the government approximated to 20% of the annual contribution. The beneficiary must be a Canadian resident with at least 18 years of age, have a social insurance number, and follow post-secondary education at university. Also, the beneficiary can take a break before continuing with their education, and the funds will be available until the beneficiary decides to go back to school (Canada, 2019).

The Canada government can provide grants to increase the saving of contributors through the following;

  • Canadian Education Savings Grant (CESG)

Each beneficiary receives the 20% from Canadian Education Savings Grant (CESG) from the government of Canada on the first $2500 annual contribution to RESP. After that, the limit is $7200 for a lifetime for a beneficiary.

  • Quebec Education Savings Incentive (QESI)

This tax measure encourages Quebec families to start saving early for post-secondary education for their children and grandchildren. QESI is a refundable tax credit paid directly into their RESP, equal to 10% of the annual contribution in which a maximum of $250 each year. But low-income families their credit increase by $50 each year.

  • Canada Learning Bond (CLB) from the Government of Canada

According to the Canada government, it contributes $100 each year, and in the first year, it contributes $500. The criteria need a beneficiary must be have been born in more than 2004.

The maximum contribution is $50000 per one beneficiary for the entire lifetime of the plan. Still, if the contributor meets the maximum contribution amount, you can proceed with another type of registered plan called Tax free savings account (TFSA).

Registered education saving plans (RESPs) can be categorized into three. These are;

  • Family RESP

It requires a contributor to be a parent or grandparent of the beneficiary. Also, allow money can be transferred from one beneficiary to another within a household, which means a beneficiary can be more than one child.

  • Individual RESP

This type of RESP does not require a direct relationship between a contributor and beneficiary. Also, the beneficiary cannot be more than one.

  • Group RESP

This type depends on the agreement between the government and the contributor. The plan is for a single beneficiary and is governed by complex rules.

Advantages of Registered Education Savings Plans [RESPs]

  • It grows tax-free.
  • Family and friends can contribute.
  • RESPs accounts can stay open for 36 years.
  • RESPs have many investments options.
  • The money can be available at the time you need it.

Disadvantages of Registered Education Savings Plans [RESPs]

  • you must pay income taxes on the money.
  • If the contributor passes away before the beneficiary uses the funds, the transfer will be complicated.
  • If the account is not used after 36 years of opening, the government takes their money back.

How can the money be withdrawn from RESP?

you can withdraw cash from RESP through the following;

  • Post-secondary education payments (PSEs).
  • Education Assistance Payments (EAPs).

Tax-Free Savings Account (TFSA)

TFSA was established in 2008 by the government of Canada for individuals who are 18 years of age and who have valid social insurance numbers to save for different purposes throughout their lifetime. Officially people started contributing to TFSA in January 2009. The annual TFSA contribution depends on the individual, and it changes each year. TFSA is tax-free for a lifetime. A non-resident of Canada but has a valid social insurance number allowed to open TFSA. But 1% tax is deductible for any contribution made. When you contribute money to TFSA, there are other opportunities to buy stocks, bonds, mutual funds and other similar investments (Kagan, 2021).


Maximum contributions













This is the registered saving plan that allows savings to grow tax-free throughout your lifetime. TFSA includes mutual funds, guaranteed investments certificates and cash.

Types of TFSAs

TFSAs can be categorized into three types. These are;

  • A deposit.
  • Annuity contract.
  • Arrangement in trust.

Advantages of TFSAs

  • Easy withdrawal process.
  • Tax-free investments income.
  • The contribution room is not determined by income.
  • Unused contribution does not expire.
  • TFSA gives a contributor various investments options.

Disadvantages of TFSAs

  • Contributions are not tax-deductible.
  • Withholding taxes apply to US lenders.
  • They are not protected from creditors.

What are the critical differences between RESP and TFSA?




Government grants




Single ownership

It can be single or joint ownership.


It grows tax-free. Contribution and income earned are not subjected to tax when withdrawn.

It grows tax-free. Government grants and income earned within plain are not taxed until withdrawn.


The minimum age is 18, and no maximum age of the beneficiary.

There is no minimum or maximum age for a beneficiary of an individual RESP.

Contribution limits

For 2021 the annual contribution limit is $6000.

There is no annual contribution, but there is a lifetime contribution limit of $5000 for each beneficiary.

Which is better for educational savings between RESP and TFSA?

Suppose you are saving money for your child’s education. In that case, an RESP is the better choice because it allows the beneficiary to earn government grant money and differentiate taxes on money earned in the account.

Who can contribute to an RESP account or TFSA?

Any Canadian can open RESP and be allowed to save for the beneficiary’s education, but the beneficiary name provided is under the age of 21. For the TFSA, any Canadian over 18 can open TFSA.

Who can withdrawal from RESP vs TFSA?

To withdraw money from the RESP, the beneficiary must confirm the proof of enrollment as a full-time or part-time student in a post-secondary institution.


Canada, G. o. (2019, 05 03). Registered Education Savings Plans. Retrieved from

Kagan, J. (2021, November 03). Tax-Free Savings Account(TFSA). Retrieved from Investopedia:


I hope you found this post to be a helpful guide to TFSA vs RRSP regarding your savings goals. To help you get the most out of your Registered Retirement Savings Plan (RRSP) before the contribution deadline, I thought I’d list some of my favourite RRSP facts for this tax year. The debate about the merits of a Registered Pension Savings Plan (RSP) versus a Tax-Free Savings Account (TFSA) has been going on in Canada for several years, and I predict that it will remain a hot topic in the future.

Many people compare a TFSA to a Registered Retirement Savings Plan because taxes are levied on it (“reverse RRSPs”). If you contribute to an RRSP, consider using any tax refunds you might receive to pay off your debts, adding taxes to your investments in TF SA, and distributing the tax benefits into the future. If your RR SPs or TFsa plans are already exhausted, you can invest an additional $14,000 into an RESP and deposit it into a taxable investment account. As a parent, it is worth considering whether it is personally meaningful for you to contribute to your child’s job – savings from secondary school or if you have already set aside your pension. TFAs are better for saving in education than RESPs, so it may or may not be suitable to prefer RESPs to RRSP.

If you have exhausted your RRSPs or TFSA and have invested money, you should consider opening an unregistered account. If you have exhausted your RRSPs or TFSAs but still have money to invest, you should open a Non-Registered Account (NPA) or a Registered Retirement Savings Plan (RRSP). If you have exhausted any RRSPs or TFSA or have any money invested, you should consider opening an unregistered account (TFRP).

If you deposit money into an account, you invest your tax money, so why would you have a TFSA or a TFSA? You can use TFSAs to make contributions to an RRSP if you are in a higher tax bracket, but you will need to make a tax deduction for this.

As far as I know, when you start a new TFSA or GIC, you can instruct your bank to move money from your Tangerine Tax – Free Savings Account to a TF SA or GIC when it matures, and you can withdraw your contributions tax-free. So if you are a TFSA, RRSP, RESP, Cash or other accounts, you can get through the first few years of your tax year without any tax deduction or penalty. You can also use a TFSA transfer form if you plan to move your money from a TFSA to a bank, such as the tax-free Tangerine savings account, so your contribution limits are not affected.

So there may come a time when you decide that if you invest in a TFSA, you want to graduate from a BFSA because you have invested in it and now want to earn more and benefit from its tax relief. If you can only select one, a tfsa is probably the right choice for you, but you should aim for both a TFSA and an RRSP.

If you choose a TFSA or RRSP, families and individuals living in a lower tax bracket are best served. Wealthsimple gives you the option to build up a registered pension savings plan with a tax-free, low-tax account. The Group Retirement Savings Plan (GRSP) is an alternative to a 401 (k) or 403 (b) retirement plan for individuals and families. It is managed, registered, not taxable, and is available to companies.

Wealthsimple’s investment offerings can grow with your changing needs over a lifetime, including RRSP, TFSA, RESP and RRIF accounts. In addition, you can hold various investments in Wealthsimple registered retirement accounts, such as the GRSP. An RRSP is an investment account that allows you to hold a portfolio of shares, bonds, ETFs, investment trusts, and other investments.

If you expect to be in a higher tax bracket in retirement, using a TFSA with leeway is a good strategy. You can unleash the power of tax evasion by investing in the stock market, and you get taxes – growth that you invest for free from the start! In addition, you will receive a significant tax refund later, which you can then reinvest in your RRSP or TF SA or open a new investment account, such as a 401 (k) or another retirement account.

The Registered Retirement Savings Plan (RRSP) offers tax relief but no free withdrawals, and there are penalties for withdrawing money from a TFSA, unlike tax-favoured accounts. It is taxable if you withdraw money directly from your registered pension fund, such as a 401 (k) or converted RRSP. However, the income from savings and investments held in your pension is not subject to tax until you withdraw the money. In addition, being locked into a pension account means you can’t access the money in the pension accounts of your employer, spouse or any of the other people you work with.

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