How WealthPath Handles the RESP & the CESG
WealthPath models the Registered Education Savings Plan (RESP) — the registered account Canadian families use to save for a child's post-secondary education, topped up by the Canada Education Savings Grant (CESG). This guide explains how to set one up, how the grant is calculated, how the plan is drawn down for school, and how an education shortfall competes with your retirement saving.
Quick Start
- Go to Assets and add an asset with account type RESP (education).
- Enter the current balance and expected return, as you would for any account.
- (Optional) Fill in the Education goal to model the drawdown:
- Child birth year
- Starts at age (e.g. 18)
- Annual cost (in today's dollars, e.g. $24,000)
- Number of years (e.g. 4)
- On Contributions, add a contribution linked to the RESP — $2,500/yr earns the maximum basic grant.
- Open Projection → All Data to see the RESP grow with the grant, then draw down over the education years in the Education and RESP columns.
If you leave the education goal blank, the RESP simply grows — it is never spent, and it is kept separate from your retirement money.
What the RESP Is
An RESP is unlike your retirement accounts in three important ways:
| RRSP | TFSA | RESP | |
|---|---|---|---|
| Contributions deductible? | Yes | No | No |
| Growth taxed yearly? | No | No | No (tax-deferred) |
| Government grant? | No | No | Yes — the CESG |
| Who is taxed on withdrawal? | You | No one | The student (≈ no tax) |
| Used for retirement? | Yes | Yes | No — education only |
Because an RESP is for your child's schooling, WealthPath earmarks it: it is excluded from your retirement-capital figures (the required balance and the fund-depletion age) and is never drawn down to fund your own retirement. It shows up as its own bucket in the projection.
The Canada Education Savings Grant (CESG)
The government matches your RESP contributions through the basic CESG:
- 20% of what you contribute each year,
- up to $500/year (i.e. on the first $2,500 contributed),
- with unused grant room carrying forward — a catch-up year can earn up to $1,000 (on $5,000 contributed),
- to a $7,200 lifetime maximum per child.
WealthPath accrues grant room each year, pays the grant into the RESP on top of your contribution, and stops once the $7,200 lifetime cap is reached. There is also a $50,000 lifetime contribution limit per child; the projection warns you if a plan exceeds it (it does not model the over-contribution penalty).
Tip: contributing $2,500/year captures the full $500 annual grant without leaving money on the table.
The Education Drawdown (EAP)
When you fill in the education goal, WealthPath spends the RESP down over the education window — from the calendar year (child's birth year + start age), for the number of years you set, at the annual cost (grown with inflation).
Each education year:
- The tuition need is paid from the RESP first, as an Educational Assistance Payment (EAP).
- The EAP is treated as tax-free in your plan. (In reality the grant and growth are taxable to the student, who usually has little or no income, so the tax is minimal — WealthPath approximates this as untaxed.)
- If the RESP runs out before school is paid for, the shortfall is funded from your saving surplus first — directly reducing what you put toward retirement that year — and then, if needed, from your portfolio (non-registered → TFSA → RRSP).
This is the heart of the feature: an underfunded RESP pulls from your retirement saving, so you can see the real trade-off between education and retirement.
Worked Example
A parent age 40 with a $40,000 RESP, contributing $2,500/year, for a child born in 2014 who starts a 4-year program at 18 ($24,000/year in today's dollars):
| Parent age | Education cost | Paid from RESP (EAP) | Shortfall | RESP balance |
|---|---|---|---|---|
| 46 | $27,833 | $27,833 | — | $50,949 |
| 47 | $28,528 | $28,528 | — | $24,968 |
| 48 | $29,242 | $26,216 | $3,026 | $0 |
| 49 | $29,973 | — | $29,973 | $0 |
The RESP covers the first two years in full, partly covers the third, and is empty by the fourth — so the last year and a half is funded from surplus and the portfolio, reducing retirement saving in those years.
Where to See It in the App
- Assets — the RESP and its education-goal fields.
- Projection → All Data:
- Net flow → RESP — your education saving each year.
- Cashflow → Education — the tuition spending in the education years.
- End balance → RESP — the earmarked RESP balance, shown separately from the retirement-capital Total.
- Year trace (click a year) — the Contributions — RESP line shows the contribution and the CESG grant; the Education (RESP EAP) line shows the tuition paid and any shortfall.
- Cashflow — RESP contributions appear in your saving, competing with RRSP and TFSA contributions for your surplus.
Assumptions & Limits
- One beneficiary per household. The CESG and contribution caps are modelled as a single child's plan. Family plans with multiple children and grant-sharing are not yet modelled.
- Tax-free EAP. The taxable portion (grant + growth) is assumed to fall under the student's personal credits. A student tax bracket is not modelled.
- Annual cost is what you enter. WealthPath does not assume a tuition figure — put in your own estimate, in today's dollars; it is grown with inflation.
- No over-contribution penalty or leftover handling. Exceeding the $50,000 limit triggers a warning only; a leftover RESP balance after school stays in the (now-inert) account.
These are deliberate simplifications that keep the RESP model easy to follow while still capturing the decisions that matter most for your plan.