RESP, RRSP or TFSA: Which account should you choose for your family?
Between children’s education, retirement and preparing for the unexpected, RESPs, RRSPs and TFSAs all play a unique role in supporting your family’s life plans. The right savings account to choose will depend on the unique combination of your needs and the tax advantages offered by each plan.
As we all know, trying to juggle the various financial acronyms can make you dizzy! To start, imagine you’re planning a vacation: you need to know how long you’ll be away (the investment horizon) and what your destination will be (children’s education, retirement, a house project, etc.). This will help you determine where to start and what to take with you (the type of investment).
Here are the main differences between these savings accounts to help you make the right decision... and make it easy to plan your family’s finances.
The three most common savings options at a glance
To determine which plan is best suited to your situation, there are a number of characteristics to consider. This comparison chart can help you make sense of Registered Education Savings Plans (RESPs), Registered Retirement Savings Plans (RRSPs) and Tax-Free Savings Accounts (TFSAs).
A brief comparison of the three savings plans
RESP |
RRSP |
TFSA |
|
|---|---|---|---|
| Année de création | 1974 | 1957 | 2009 |
| Main objective | Post-secondary education | Retirement | Various projects |
| Grants | Up to $12,8001 per child | ||
| Tax-sheltered growth |  |
 |
 |
| Tax deduction | |
||
| Annual contribution ceiling | No annual limit (lifetime maximum of $50,000 per child) For grants: annual limit of $2,500, lifetime limit of $36,000 |
The lesser of: 18% of your most recent yearly income or the limit of $33,810 for 2026 | Limit of $7,000 for 2026 (or $109,000 if you have been contributing since 2009) |
| Unused contribution room | It is possible to catch up on grants, subject to an annual maximum of $2,500 |
Accumulate starting with your first tax return Deferred until December 31 of the year you turn 71 |
Accumulate starting in 2009 or the year you turned 18 Deferred until death |
| Taxed at time of withdrawals | Non-taxable contributions Grants and taxable income for your beneficiary |
100% taxable2 | None |
- Check your own contribution room on your CRA My Account.
RESPs: an unbeatable boost from the government
In 2026, the Registered Education Savings Plan is still the most effective way to accumulate capital for you and your children, since the governments of Canada and Quebec finance a portion of their future education. “Thanks to the Canada Education Savings Grant (CESG) and the Quebec Education Savings Incentive (QESI), your investment can be boosted by 30% to 60%.3 No other investment can guarantee such a return, not to mention the fact that these sums also generate tax-sheltered gains,” explains Julie St-Cyr, Financial Planner and Director of Sales and Business Development at Kaleido.
- Grants and returns will be remitted in the form of Education Assistance Payments (EAP) to your beneficiary, who must include these amounts on their income tax return for the year in which they were paid.
- As a subscriber, your contributions belong to you, and they can be withdrawn tax-free during your beneficiary’s post-secondary education. You can give them to your child, finance personal projects or catch up on unused RRSP contribution room, for example.
Please note that you have until the end of the calendar year in which your teenager turns 17 to receive the maximum grant if the prerequisites are met. In particular, you must have contributed to an RESP before they turn 15.
How much could an RESP earn you?
Get a personalized estimate based on your child’s age and your anticipated monthly payments in just a few seconds.
RRSPs: lower your tax bill
The Registered Retirement Savings Plan remains the tool of choice for preparing for your golden years. The main advantage of contributing to a short-term RRSP is the tax deduction: your taxable income will be reduced by the amount of your contribution, which can lower the income tax you owe or even result in a refund. On the other hand, amounts withdrawn from an RRSP will be fully taxable, but only when disbursed, at the marginal rate for the year of withdrawal.
Note that amounts held in an RRSP can also be used to:
- finance your first home through the Home Buyers’ Plan (HBP);
- participate in the Lifelong Learning Plan (LLP).
TFSA: the Swiss army knife of savings
The Tax-Free Savings Account also lets you grow your money tax-free. Travel, emergency funds, renovations: the TFSA offers great flexibility for financing a variety of short-, medium- or long-term projects. Contributions are not tax-deductible or eligible for grants, but the money you withdraw is not taxable either.
FHSA: the new kid on the block when it comes to saving for home ownership
Introduced in April 2023, the First Home Savings Account (FHSA) has quickly become a must-have to help young families save for their first home or condo. Its tax strategy combines the advantages of an RRSP (tax deduction) and a TFSA (tax-free withdrawals and tax-sheltered returns), in addition to allowing you to:
- contribute up to $8,000 per year (lifetime maximum of $40,000);
- coordinate your withdrawal with the RRSP HBP, giving you greater purchasing power.
What will a $5,000 investment be worth in 17 years?
To illustrate the impact of the different advantages of RESPs, RRSPs and TFSAs, we compared an investment of $5,000 over 17 years, with a 5% return, for a Quebec resident.
How much will $5,000 be worth in 17 years, depending on your savings choices?
| RESP | RRSP | TFSA | |
|---|---|---|---|
| Contribution | $5,0004 | $5,000 | $5,000 |
| Grants | $1,5005 | $0 | $0 |
| Tax refund | $0 | $1,8066 | $0 |
| Capital invested | $6,500 | $6,806 | $5,000 |
| Return | 5 % | 5 % | 5 % |
| Investment horizon | 17 years | 17 years | 17 years |
| Capital at maturity | $14,729 | $14,425 | $11,330 |
| Tax on withdrawal | $07 | $-3,8288 | $0 |
| Net balance accumulated at maturity | $14,729 | $10,597 | $11,330 |
Remember: there’s always time to recover your unused RRSP or TFSA contributions when you withdraw them from your RESP! At equal returns and time horizons, the RESP is the most advantageous, with a value of $14,729, surpassing the RRSP and TFSA thanks to the immediate impact of government grants.
- Obviously, results vary depending on the tax rate and situation of each individual. If you would like to continue the comparison on your own, the Institut de planification financière offers a calculator that lets you compare these three investments as well as a mortgage prepayment.
Don’t forget the RDSP for specific cases
Less well known than its predecessors, the Registered Disability Savings Plan (RDSP) is crucial if a member of your family has a disability entitling them to the Disability Tax Credit (DTC). With grants of up to $3,500 a year, it’s a powerful financial inclusion tool aimed at ensuring the long-term financial security of a disabled person.
- To register, your beneficiary must have a valid social insurance number, be a Canadian resident and be under 60 years of age.
Making the right choice: a question of balance
If we go back to the vacation we were planning, you could say that the RESP is your plane ticket partially paid for by the government, the RRSP is your reserve fund for a long voyage, and the TFSA is your flexible safety cushion.
“In any case, remember that your situation is unique! When it comes to investing in your family’s future, if you have young children—even if adolescence is just around the corner—it’s always a good idea to seek advice from financial or education savings specialists,” says Julie St-Cyr.
Frequently asked questions (FAQ)
If your beneficiary does not go on to post-secondary education, you have three options:
- Be patient, since the lifespan of an RESP is 35 years after it is opened. This gives your child—now an adult—time to re-evaluate their career choice or to perfect their skills in their field!
- Transfer the RESP to another beneficiary.9
- Recover your investment and its returns in the form of accumulated income payments (AIP),9 then transfer them to your RRSP, for example. As for grants, they will have to be returned to the government.
Learn more about your options in the article “My child is leaving school: what should I do with their RESP? ”.
Since your children’s post-secondary education will arrive before your retirement plans, it’s generally advisable to prioritize the RESP as a savings solution when you have children. However, one does not preclude the other. Depending on your income and personal priorities, you can also maximize the tax benefits of both RESPs (grants) and RRSPs (tax deductions) by putting the same money to work in both plans.
- Strategy 1: Prioritize the RESP while your child is young and then reinvest the contributions recovered on withdrawal for post-secondary education into the RRSP.
- Strategy 2: Contribute to the RRSP first, then reinvest the subsequent tax refund in the RESP.
Find out more about these two strategies at “Which investment is more advantageous, an RESP or an RRSP? ”.
1. The lifetime maximum per beneficiary is $7,200 in Canada Education Savings Grant (CESG) and $3,600 in Quebec Education Savings Incentive (QESI). Canada Learning Bond (CLB) of up to $2,000 per beneficiary for a child born after December 31, 2003, whose family is financially eligible. Certain conditions apply. See our prospectus at Kaleido.ca.
2. With the exception of withdrawals made under the Home Buyers’ Plan (HBP) or Lifelong Learning Plan (LLP). These must be repaid within 15 years for the HBP and 10 years for the LLP, failing which the amount will be added to taxable income.
3. Canada Education Savings Grant (CESG) from 20% to 40% and Quebec Education Savings Incentive (QESI) from 10% to 20%, according to adjusted family net income. Certain conditions apply. See our prospectus at kaleido.ca.
4. Represents a maximum of $2,500 in annual contributions, plus a maximum of $2,500 to recover unused grant entitlements.
5. Grant of 30% (20% CESG and 10% QESI in Quebec) on a maximum of $5,000, provided the beneficiary has unused grant entitlements and does not exceed the maximum eligible contributions. Does not include additional grants for low- and middle-income families.
6. Based on the current marginal tax rate of 36.12%.
7. When withdrawing for post-secondary education, the RESP subscriber can withdraw their capital tax-free, while the beneficiary adds the amounts received from Educational Assistance Payments (EAPs) to their own income.
8. Calculated using a marginal tax rate of 26.53% at disbursement.
9. Certain conditions apply. See our prospectus at Kaleido.ca.
