RESPs – The Other Side of the Process

The school year is now officially well in motion, and for those with children in grade 12, I’m sure there are regular conversations about post-secondary schooling…where to go, what classes to take, etc..

With your Registered Education Savings Plan (RESP), this is where years of saving and planning come together. With consistent savings and government matching, the capital in your RESP has grown. Soon you’ll have the privilege of using that capital, and the direct costs of raising your child are about to plummet. This is for 2 reasons and the outcome catches many parents by surprise.

First, with a well-funded RESP, you have pre-funded a large portion of the next years’ costs…it no longer comes from your cash-flow. You no longer need to save in an RESP, and any school-related bills will be paid with RESP money. Second, your child is now old enough to have some level of marketable skills and the time to work part-time (even if just during the summer months) so that they can pay for their own entertainment and some level of lifestyle bills (e.g. clothing). When you add these together, it makes for a material improvement in your net annual cash-flow situation.

To take money out of the RESP, there are a couple of steps to know. First, every post-secondary institution provides “Proof of Enrollment” statements when requested, and we need these to facilitate an RESP withdrawal. Then, when the withdrawal is processed, we have the option of having the cheque/deposit sent child/beneficiary - it’s totally up to you. My advice has always been that the money go to the parent first to allow the parent to oversee how the money is spent, but it is your choice.

 With RESP money, there are no required submissions of expenses. The money can be used for the usual expenses (tuition, books, room & board, etc.), but it can also be used for things like furniture, clothing, and commuting. As long as the child is enrolled in an approved post-secondary institution, withdrawals can be taken from the RESP and any taxable gains will be in the hands of the child.

All in all, in my opinion, the RESP program is good legislation that works well in real life. When used properly, it not only provides you with added financial abilities, but helps build a solid foundation for your children to learn and launch their careers as young adults. I hope you have found this information useful and worthwhile.

Should you have any questions about RESPs and/or how your RESP will work for your children, please feel free to reach out to your RGF advisor.

Estate Planning Misconceptions

In this 5-minute webinar, we explore an important but often misunderstood area of financial planning.

Learn More