Should I buy my grandkid an RRSP or RESP?

There’s a big difference. Here’s what you need to know

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From the April 2016 issue of the magazine.

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Q: Can an aunt, uncle or grandparent open an RRSP or RESP for a grandchild, niece or nephew as a gift?

—Elizabeth Adolph, Lillooet, B.C.

A: The acronyms “RRSP” and “RESP” may differ by only one letter, but the plans themselves are very different. The RRSP is for retirement savings and you cannot open one for a child. That’s because RRSP contribution room is based on a person’s earned income. Once she has some, she’ll file a tax return and start building that RRSP room, but you can’t do it for her.  However, you certainly can open up an RESP for a child’s education savings, whether they are related to you or not. Your gift will qualify for the Canada Education Savings Grant, which amounts to 20% of the first $2,500 you contribute, up to $500 each year. I’d recommend that you coordinate with the parents as there is a limit on total contributions of $50,000 and if you go over that amount you’ll face a penalty. The parents may also have other more immediate financial needs that would benefit the child, such as helping to pay for activities or tutoring.

Bruce Sellery is a frequent guest on financial television shows and author of Moolala. Do you have your own personal finance question? Write to us at

2 comments on “Should I buy my grandkid an RRSP or RESP?

  1. Would it not be better to open a separate non registered fund, pay the taxes on it yearly. If owner of non reg policy dies, Then have the child listed as beneficiary, of course this in a trust account through offering company or one of the parents as trustee until child is age of majority? should the grandparent live to the child’s 18th birthday simply transfer or cash out plan, give money to child, if child is worthy of it?


    • Bernie; IMHO, the 20% gov’t grant is HUUUUUGE in compounding terms. I am dealing with a 6 figure RESP that I am trying to unwind right now. When I opened it, I never thot!! Put the grandkids as beneficiaries, leave the account to a parent in your will, and invest in a nice utility stock, with DRIP.


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