| September always feels like a season of transition. For some families, it means returning to familiar school routines. For others, it marks something much bigger: helping a child pack their belongings, move into residence or begin their first semester of college or university As many of you know, our office tends to be a little quieter during the summer months. Children are home from school, families are on vacation, and everyone is enjoying the sunshine while we have it. Understandably, sitting down with your financial advisor is not always at the top of the summer to-do list! There is, however, one area that traditionally keeps us very busy at this time of year: helping clients prepare to send their children off to post-secondary school. Throughout the summer, we have been reviewing education costs, organizing RESP withdrawals and helping families determine how much to withdraw and from which portion of the plan. There is a lot to coordinate during this transition, both practically and emotionally. But there is also something incredibly rewarding about watching your child take this next step and knowing that, financially, you are ready for it. After years of saving, the RESP is no longer simply an account on a statement. It becomes tuition, books, housing and transportation. More importantly, it represents choices and opportunities for your child and the peace of mind that comes from knowing your family can focus on this exciting milestone without the same degree of financial stress. |
| Post-Secondary Can Feel a Long Way Off When children are young, post-secondary education can feel very far away. With so many immediate expenses competing for a family’s income, it can be tempting to tell yourself that you will begin saving when you have more money available. But just like any other savings goal, you do not need to wait until you can contribute a substantial amount. What matters most is building the habit. Start with something, anything that makes sense for your family right now. That may be $10 a month, $50 a month or another amount you can comfortably manage. The goal is simply to begin and then gradually increase the contribution as your financial circumstances allow. Starting early gives you two valuable advantages: access to government grants and more time for your savings to grow. But perhaps the greatest advantage is that you have taken the first step. Once the habit is established, it becomes much easier to build on it over time. |
| Every Contribution Gets a Boost For every $100 you contribute to an RESP, the government adds $20—up to $500 per child each year and a total of $7,200 over the child’s lifetime. Whether you can save $50, $100 or $2,500, the important thing is to start. Small contributions, made consistently, can grow into something meaningful. |
| The Real Value of Starting Early Imagine a family begins contributing $2,500 annually when each of their two children is born. By the time the children turn 18, the family could have approximately:$107,000 for each child$214,000 in totalOf the $107,000 available for each child:The family contributed $45,000The government added $7,200Investment growth could account for approximately $54,800The most powerful part of this example is not simply how much the family contributed—it is how long the money had to grow. Starting early gives every contribution, every grant and every dollar of growth more time to build. This example assumes contributions are made near the beginning of each year and earn an average annual return of 7%. It is provided for illustration only. Investment returns are not guaranteed, and actual results will vary. |
| Let the Whole Family Help One of my favourite suggestions as an advisor is to invite the entire family to participate. Grandparents, aunts, uncles and close family friends often want to give children something meaningful for birthdays, Christmas and other special occasions. Instead of spending all of that money on toys or gifts that may be forgotten, outgrown or discarded before the end of the year, consider asking them to contribute toward the child’s RESP. They can still give the child something small to open, while directing part of their gift toward an education fund that can have a much longer-lasting impact. Over 18 years, those contributions can add up. They may also help the family collect more of the available government grant and give the money additional time to grow. It may not feel as exciting as the biggest toy under the Christmas tree today but helping a child graduate with more opportunity and less debt is an extraordinary gift. |
| Now Your Child Is Starting Post-Secondary—What Happens Next? Once your child enrols in post-secondary school, it is time to turn years of savings into an RESP withdrawal plan. An RESP is made up of three components:Contributions: The money you originally deposited into the RESP.Government grants: The money added by the government.Investment growth: The growth earned on the contributions and grants over time.The most important thing to understand is that only part of an RESP withdrawal is taxable:Your original contributions are withdrawn tax-free.The government grants and investment growth are withdrawn together as an Educational Assistance Payment, or EAP, and are taxable to the student.Since many students have little income and may also have tuition tax credits, they often pay little or no tax on their EAP withdrawals. However, every student’s circumstances are different, so the amount and timing of withdrawals should still be planned carefully. Before funds can be released, the student must provide proof of enrolment in an eligible post-secondary program. From there, families have considerable flexibility in deciding how the money will support the student’s education. RESP funds are not limited to tuition and textbooks. They can also help with rent, groceries, technology, school supplies, transportation and many of the other costs that come with attending school. In some circumstances, this could include purchasing a vehicle the student needs to travel to and from school. The important point is that you are not required to use every dollar for a direct school fee. The funds can help cover the broader cost of supporting your child while they complete their education. |
| Why a Withdrawal Plan Matters It can be tempting to withdraw only the amount needed for tuition each semester or to use the original contributions first because they are tax-free. However, that is not always the best strategy. A thoughtful withdrawal plan should consider: The student’s employment and other taxable incomeThe amount of grants and growth remaining in the RESPThe expected length and cost of the programWhether there are other children in a family RESPThe student’s available tuition creditsThe timing and amount of future withdrawalsIt is also important not to leave too much grant and growth in the RESP until the student’s final year. Spreading taxable EAP withdrawals across several years may allow the family to make better use of the student’s lower-income years and reduce the risk of funds being left behind. The withdrawal strategy should be revisited annually because education costs, employment income and the student’s plans can all change. |
| When the Future You Planned for Arrives An RESP is more than an education savings account. It is a long-term family plan. When children are young, the focus is on starting with something, accessing available grants and giving your savings time to grow. When post-secondary school begins, the focus shifts to withdrawing those funds thoughtfully and making the most of everything you worked so hard to build. When you first open an RESP, the day your child leaves for post-secondary school can feel impossibly far away. Then, somehow, it arrives. The account that existed quietly in the background for all those years suddenly becomes tuition, books, rent, transportation—and the freedom for your child to take their next step with confidence. Even as I write this, I find myself thinking about my own little girl leaving for school one day—and it makes me emotional. If you are reading this while preparing to send your baby off to college or university this fall, I can feel the energy of that moment: the excitement, the pride, the worry and the ache that comes with watching them take such a big step toward building a life of their own. We may never feel completely ready for the emotions that come with letting our children go. But there is tremendous peace of mind in knowing that, financially, we prepared for this moment. Whether your child was just born, is starting kindergarten or is packing for post-secondary school this fall, every contribution is about more than saving money. It is about creating choices, easing a future burden and giving your child the opportunity to pursue what comes next. One day, the RESP will no longer be a number on a statement. It will become the future you helped make possible. |