Back to School and Registered Education Savings Plans

I’ll admit it: Saving for our children’s education was not a priority for me. In fact, I didn’t open an RESP until my oldest child was 9. We had a mortgage to pay, some large expenses the average Canadian family does not have to pay, and RRSPs and TFSAs to fund. We’d also heard quite a few horror stories about group RESPs so we weren’t sure where to start.

When I was ready to commit, I started by reading through the useful and informative articles on Mike Holmes website Money Smarts. I strongly recommend others do the same.

His introductory article How To Set Up The Safest, Simplest And Cheapest RESP Account  is particularly useful to time-strapped worried parents.

What Happens to Your Children’s RESPs if You Die Before They Use Them?

Kati Basi, in a guest post at the Blunt Bean Counter, says:  “Many of my clients assume that their children (as the beneficiaries under their RESP) would automatically receive the RESP upon their death, just as if the children were beneficiaries under their Registered Retirement Savings Plan (“RRSP”). This assumption is, for the most part, dead wrong.” Read how to protect your children’s RESPs, especially the grant money, in “New Will Provisions for the 21st Century – RESPs .“ Then update your will or ask the person who funded your children’s RESPs to update theirs.

Group Scholarship Plan RESPs Versus Bank RESPs

Before banks started offering no fee RESPs where investors could buy GICs or mutual funds, and long before self-directed brokerages allowed RESPs, the only choice most parents had was to enroll in a Group Scholarship Plan. These plans are much riskier than bank RESPs. You don’t get all of your money back if your child does not go on to post-secondary education. You also may have to pay very large fees if you want to transfer your plan elsewhere.

Ellen Roseman details a good example of these unexpected costs in Roseman: [Group Scholarship Plan] RESPs are easy to start and hard to leave.

CBC News provides an in depth look at these group plans in Group RESPs: reading the fine print: Popular plans aren’t for everyone .The plans are not actually evil they just sometimes seem that way particularly if a person signed up for one without really understanding how they work.

Using the RESP Money for Education

Big Cajun Man describes some of his personal experiences with taking money out of his children’s RESPs to pay for their university enrollment. While the government’s required paperwork was short, he was startled at how much other paperwork TD required. So was I! You can read the details at RESP: and More Trees Died.

Related Reading

Join In
Are you contributing to a RESP for your child or children? Or is your plan helping your children pay their way through school? Are you happy with the process? Please share your experiences with a comment.

2 thoughts on “Back to School and Registered Education Savings Plans

  1. I have 2 sons in university and I wish I had done more to save but I just didn’t have much. I am trying to help now but you know that once you are behind it is just too hard to catch up.

    Both boys will graduate with nearly $40,000 in student debt. I can’t go back and do things differently but maybe others can learn from my mistake.

    • I agree that it’s great if parents can help by saving in an RESP, but I disagree that you made a mistake. If the parent doesn’t have a high income, there is nothing to be saved. In those cases, it’s up to the children to forge their own path.

      Two of my close relatives, for example, signed an agreement with the Canadian military: in return for the government paying their university costs for an engineering degree, they agreed to work (for pay!) for 4 years after graduation for the military. Obviously, that’s not a choice everyone is prepared to make, but these kinds of options are out there.

      Another close relative enrolled in a co-op engineering program and paid his way through with the money he made from his work placements. Again, not a choice everyone is eligible to make, but it’s an option worth evaluating.

      Now if you’re telling me that tuitions have been allowed to rise too high, too fast, I will wholeheartedly agree with that! $40,000 of debt is outrageous and I would like to see an explanation from the government about why burdening young people with so much debt is reasonable or prudent fiscal policy.

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