After contributing thousands of dollars to my daughter’s RESP, she’s changed her mind about going to university. What happens to those saved funds?

You’ve spent years saving diligently for your daughter’s education, only to learn she’s decided not to go away to unviersity after all. If you have thousands stashed in a Registered Education Savings Plan (RESP), you might be wondering: What happens to that money now?

This hypothetical situation is something that many Canadians can relate to, since, sometimes, what you have planned for your child might not actually be an avenue they're intersted in exploring.

There are millions of Registered Education Savings Plan (RESP) accounts in place to help Canadian families save for their children’s post-secondary education. The total amount held in these RESPs reached $89.8 billion at the end of 2024. That said, an RESP is one of the most flexible education savings tools available — but it’s also widely misunderstood.

That’s because even if plans change, RESP college plan funds can get redirected to another investment, aside from any grant money from the government, which must be paid back. Keep reading to learn how to reinvest any RESP funds that won’t go toward post-secondary education.

What is a Registered Education Savings Plan (RESP) and how does it work?

The Registered Education Savings Plan (RESP) is a tax-advantaged saving plan designed to cover future education costs. It offers government grants like the Canada Education Savings Grant (CESG) (1) and the Canada Learning Bond (CLB) (2), which match 20% of contributions up to a limit, making it a powerful tool to cover your child's post-secondary education.

Anyone can open an RESP for a child: a parent, grandparent, guardian, godparent or close family friend. This person is designated as the subscriber, with the child being the beneficiary who will eventually use the funds within the account.

Any financial institution can offer an RESP such as banks, credit unions, brokerages or even robo-advisors. Once you open your RESP account, you can deposit any amount of money you wish — note, there is a lifetime cap of $50,000. And while there’s no minimum amount you must invest, CA$2,500 annually is the sweet spot if you want to maximize your investment through the CESG and CLB. These grants can make up between 20% to 40% of your contributions and are based on the beneficiary’s family net income, according to Desjardins (3).

The money in an RESP can be invested in GICs and mutual funds for lower risk and stable growth, or stocks and ETFs for higher potential returns — and risk — alongside other options to help the savings grow tax-free (4). Robo-advisors choose the investments for you based on your risk profile and the target date for withdrawing the funds (5).

When you need to pay for an apprenticeship, college, university or trade school, the Subscriber makes a withdrawal. The money can also cover books, housing, meal plans, rent, school supplies, transportation, tuition and more.

The beneficiary doesn’t have direct access to the funds but can use them as needed.

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What happens if your child doesn’t go away for college?

If your child isn’t heading off to a four-year university campus, your first step is to figure out whether they’re forgoing higher education entirely or simply choosing another path.

If they’re planning to attend a college, a trade school, or even take online classes from an accredited institution, you can still use RESP funds to cover tuition and other eligible expenses without penalty. Many families don’t realize that accredited vocational and technical schools are also fair game for RESP plans. Even if your child commutes from home, their tuition and fees are likely covered.

If they’ve decided to study part-time, you can still use the funds proportionally for eligible costs. Some families find that student housing expenses aren’t needed if their child is living at home, but tuition, books and required supplies continue to qualify.

What exactly are qualified education expenses?

Qualified expenses include tuition and fees at eligible institutions, books and supplies required by the program, technology costs — for example, a computer or software, if it’s required — and room and board for students enrolled at least part-time. To qualify for part-time studies, a program must last at least three consecutive weeks and require a minimum of 12 hours of study each month (6).

What if your child opts out of post-secondary education?

Let’s say your child has decided to skip college, trade school or any eligible training program altogether. You still have options.

Keep the money in the RESP. You can leave the money in the RESP for up to 36 years. So if they need some time to find their true calling first, they can still take advantage of the saved funds if they decide to attend college or university later in life — even as an adult (7).

Transfer the funds to different beneficiary. You can also transfer the funds to another child, such as a niece or nephew, or even a future grandchild without triggering taxes or penalties. Transferring the funds is generally tax-free for contributions and investment growth, but you may have to repay government grants if the new beneficiary doesn’t meet the eligibility criteria.

Transfer funds to a Registered Retirement Savings Plan (RRSP). Moving your RESP funds to an RRSP may let you defer the taxes on the RESP investment growth. While an RESP allows you to deposit as much as $50,000, an RRSP will be subject to contribution limits. There are other rules that apply such as:

• The RESP you’re taking from must have been open for at least 10 years
• The beneficiary must be at least 21 years old and have decided against post-secondary education
• The RRSP you wish to transfer to must allow this type of transfer
• You’re a Canadian resident

Close the RESP. Lastly, if you decide the RESP isn’t going to get used, you can close the account. You’ll get all your contributions back and you’ll have to return the government grant money. While you won’t have to pay taxes on the contributions themselves, you will have to pay tax on the growth on these contributions at your regular tax rate (8), plus a 20% penalty (12% in Quebec).

Article sources

We rely only on vetted sources and credible third-party reporting. For details, see our editorial ethics and guidelines.

Canada Education Savings Grant (1); Canada Learning Bond (2); Desjardins (3); Government of Canada (4); Morningstar (5); CIBC Investor Services (6); Canada Life (7); Government of Canada (8)