RESP vs TFSA
Same money, same growth. One of them gets a cheque from the government.
The honest comparison for Canadian parents: where the RESP genuinely wins, where the TFSA is the better answer, and a live projection of the gap on your own contribution.
Run the two side by side
RESP at 18
$73,594
- Your contributions
- $37,440
- Government grant
- $7,200
- Growth
- $28,954
TFSA at 18
$61,583
- Your contributions
- $37,440
- Government grant
- $0
- Growth
- $24,143
On identical contributions and identical growth, the RESP finishes $12,011 ahead of the TFSA by age 18. The difference is the government grant, compounded. The trade-off is flexibility: RESP money is committed to education.
Where each one wins
| Factor | RESP | TFSA | Edge |
|---|---|---|---|
| Government grant | 20% on the first $2,500 a year, up to $7,200 per child | None | RESP |
| Tax on growth | Deferred; taxed in the student's hands, usually at or near zero | None, ever | Even |
| Contribution room | $50,000 lifetime per child; no annual cap | Your own annual room, shared with every other TFSA goal | RESP |
| If the child does not attend school | Grant is returned; growth is taxed plus 20% penalty unless moved to an RRSP | Nothing happens. The money is simply yours | TFSA |
| Who controls the money | You, the subscriber — payments must go to the student for education | You, for anything at all | TFSA |
| Effect on student aid | Withdrawals count as student income | Parental assets are generally not counted the same way | TFSA |
Projections are illustrations on the assumptions you set, not guarantees. Tax outcomes depend on your own situation.
Common questions
- Is an RESP or a TFSA better for education savings?
- For money you are confident will be spent on education, the RESP wins on arithmetic: the 20% grant is a guaranteed return no TFSA can match. A TFSA wins on flexibility, since the money is never locked to a purpose. Most families use the RESP up to the grant threshold first, then the TFSA for anything beyond that.
- Should I max the RESP before contributing to a TFSA?
- Contribute enough to the RESP to capture the full annual grant — $2,500 a year, or $208.33 a month — before adding to a TFSA for education. Beyond the grant threshold, the RESP loses its edge and the TFSA's flexibility usually matters more.
- Can I use both an RESP and a TFSA for my child?
- Yes, and it is the most common answer. The RESP captures the grant; the TFSA holds the overflow and the money you want available for anything, including a first car, a gap year, or a down payment.
- What if my child gets a scholarship?
- RESP money can still be used for eligible expenses like housing, books and transport. Anything left can be rolled to a sibling, moved to your RRSP if you have room, or withdrawn with the grant repaid and growth taxed plus a penalty.
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