Post-secondary education is a big piece of that puzzle. Whether your child dreams of becoming a chef, a landscaper, or a surgeon, chances are good they’ll need some form of training or schooling after high school. And that’s where a Registered Education Savings Plan (RESP) can help.
But let’s be honest: RESPs can sound confusing. And there are a lot of outdated ideas floating around. So let’s break down what RESPs are, how they actually work, and what military families need to watch out for.
What’s an RESP?
An RESP lets your money grow tax-deferred and gives you access to free government money. It’s designed to help families save for a child’s post-secondary education. When used properly, it’s one of the best deals around.
Here’s why:
- The Government of Canada will match 20% of what you put in. The maximum grant is $500 per year and $7,200 lifetime per child.
- The money grows tax-deferred while it’s in the account.
- When your child eventually takes it out, the grants and growth are taxed in their hands, not yours. Since most students have little or no other income and access to tuition credits, the tax bill is often zero.
It’s that simple. But that doesn’t mean the choices are always clear. So let’s tackle a few of the most common myths that can trip people up.
Myth #1:
“Only parents can open an RESP”
Not true. While most RESPs are opened by parents, any adult can open one for a child. That includes grandparents, aunts, uncles, godparents, or family friends.
Why does that matter for CAF families? Because your child’s community might span provinces or even countries. If a relative wants to pitch in for their future, they can. And if you're away on deployment, your spouse or partner can still make contributions, or vice versa.
Just make sure the contributions are coordinated. Overcontributing to one child’s RESP, even across multiple accounts, can trigger penalties.
Myth #2:
“My kid’s not university-bound, so what’s the point?”
This one’s outdated. RESPs aren’t just for four-year university degrees. Your child can use the money for:
- College programs (including military college)
- Trade and technical schools
- CEGEP in Quebec
- Registered apprenticeships
- Part-time or online studies
- And more...
There is a diverse list of educational institutions, so even if your child wants to become a mechanic, a hairdresser, or a paramedic, the RESP can still help cover the cost.
And if they don’t end up using the money? You still have options:
- You can always wait and see, since the plan can remain open up to 35 years.
- With an RESP Family Plan, you can use the money for another child.
- Even if you end up closing the plan, you’ll forfeit unused grant money, but your original contributions and most investment growth remain yours.
Myth #3:
“My kid got a scholarship, so we don’t need it anymore”
Even with a scholarship, textbooks, rent, food, and travel still add up fast. What’s more, scholarships don’t always work out as planned, such as when a child falls below a required academic threshold.
Even if your child lands a scholarship, RESP money can still be used to cover expenses such as books and supplies, rent or residence fees, food and transportation, and travel home for the holidays.
And what many people don’t realize is that you can contribute to an RESP for up to 31 years from the date the plan is opened — giving you plenty of time to plan ahead.
Myth #4:
“RESP withdrawals are taxed and I don’t want to lose money”
Yes, but only the grant money and growth are taxed, and only in your child’s hands.
That’s a huge advantage, because students often have little to no taxable income and also qualify for tuition tax credits. As a result, the final tax bill is usually zero or close to it.
If your plans change and you need to access your RESP savings, you may need to forfeit the grant money, but you can always withdraw your original contributions tax-free.
Why RESPs are especially powerful for military families
You might move a lot for work, but your RESP travels with you. Family across the country can still contribute. When you’re juggling multiple kids and multiple postings, you need a savings strategy that’s easy to manage. And free government money is too good to leave on the table.
Not sure if an RESP can fit in your budget? A SISIP financial counsellor can help you find the answer. It’s well worth a look. You’ll get free grant money, tax-deferred growth, and peace of mind knowing you’re setting them up for success, no matter what their path looks like.
Speak to a SISIP investment fund advisor for CAF-specific, jargon-free RESP support.
