Funding a child's education and saving for retirement, two of the most common goals for Canadian investors, don't have to compete with one another. There are dedicated registered accounts designed for each purpose: the Registered Retirement Savings Plan (RRSP) and the Registered Education Savings Plan (RESP). Understanding how each works, and how they may complement one another, is a meaningful first step toward a plan that honours both goals.

An Edward Jones financial advisor can review your financial situation and help recommend a path forward.

What is an RRSP?

An RRSP is a tax-advantaged investment account designed to help Canadians save for retirement. Contributions are tax-deductible, meaning they may reduce your taxable income in the year you claim them. Savings inside the account accumulate on a tax-deferred basis, and you pay tax on those funds when you eventually withdraw them, ideally in retirement, when your income may be lower.

Your annual RRSP contribution room equals 18% of your previous year's earned income, up to a government-set maximum. Unused room carries forward indefinitely. An RRSP matures on December 31 of the year you turn 71, at which point the funds in the RRSP must be transferred to a Registered Retirement Income Fund (RRIF), used to purchase an annuity, taken as cash, or some combination of these options. In all cases, the RRSP must be closed by December 31 of the year you turn age 71 – you cannot maintain an RRSP account after this point.

One lesser-known advantage: you don't need to claim your RRSP deduction in the same year you make the contribution. Contributing now for tax-deferred growth, then claiming the deduction in a higher-income year, may make a meaningful difference to your long-term tax position.

What is an RESP?

An RESP is a tax-deferred savings account designed to help families save for a child's post-secondary education. Contributions aren't tax-deductible, but the investments grow tax-deferred, and when the student withdraws funds for qualifying education, a portion of those withdrawals are taxable at the student's (typically much lower) rate.

One thing that sets the RESP apart is access to government grants. The Canada Education Savings Grant (CESG) matches 20% of the first $2,500 you contribute each year per child up to $500 annually and $7,200 over the lifetime of the plan. Families who qualify based on income may also access the Canada Learning Bond (CLB), worth up to $2,000 per eligible child, even without making contributions of their own.

There is no annual contribution limit for an RESP, but the lifetime limit is $50,000 per child. Government grants are not counted toward this maximum, and the plan may remain open for up to 35 years.

RRSP vs. RESP: key differences at a glance

How to balance RRSP and RESP contributions

For families weighing both goals, there's no universal formula, but a few principles may apply:

Need help determining which goals to prioritize?

The MyPriorities quiz from Edward Jones helps you compare and rank what matters most to you a meaningful first step before meeting with an Edward Jones financial advisor.

Can you transfer an RESP to an RRSP?

Transferring RESP funds to an RRSP is possible under specific circumstances. If a child doesn't end up pursuing post-secondary education, your original contributions come back to you tax-free, and government grants must be returned to the government.

For the investment growth accumulated inside the plan, you may be able to roll up to $50,000 into your RRSP (using any available contribution room from previous years), provided the RESP has been open for at least 10 years and the beneficiary is at least 21 years old and not enrolled in qualifying education. This transfer, known as an Accumulated Income Payment (AIP), may help redirect some of the plan's tax-deferred growth toward your retirement savings.

An Edward Jones financial advisor can help you determine whether you qualify and how to approach the transfer in a tax-efficient way.

Can you transfer an RRSP to an RESP?

There is no direct mechanism to transfer funds from an RRSP to an RESP. That said, you may choose to withdraw from your RRSP and contribute the after-tax proceeds to your RESP. Keep in mind that RRSP withdrawals are fully taxable in the year they're made, so this path carries a real tax cost. A more tax-efficient alternative may be to use your RRSP tax refund as a source of RESP contributions. This approach may preserve the tax-deferred growth inside your RRSP while still building education savings, and the RESP contribution may attract the CESG on top.

We can help

Balancing education and retirement savings is one of the most common planning challenges Canadian families face. If you're looking for guidance on how to approach both goals together, an Edward Jones financial advisor can help you think through your options and build a plan that reflects your income, your timeline and what matters most to you and your family.