ABCs of RESPs

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  By Guest Blogger Sinan Terzioglu
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It’s never too early to start saving for your child’s education but all too often I hear about unsuspecting new parents signing up with group RESP providers like Canadians C.S.T. Consultants and Canadian Scholarship Trust Foundation and not understanding the high enrollment fees and sales charges.  They’re outrageous and can amount to 20%+ of contributions.

Group RESPs pool funds from a number of individual accounts and parents buy units of the plan based on a contract.  Providers typically manage plans through non-profit trusts or foundations but market and administer the plans through a distributor working under a for-profit corporation linked to the foundation.  The plans are inflexible and in the early years a significant portion of the contributions does not go towards a child’s education but instead towards paying off sales charges.  Needless to say, it is best to avoid them.

For parents not working with an advisor the best way to start saving for their children’s education is to open a self-directed RESP with a bank, or discount brokerage.  As soon as a child has a social insurance number contributions can flow.  The lifetime contribution limit per beneficiary is $50,000 and the government incentivizes subscribers with the Canadian Education Savings Grant (CESG) adding 20% to the first $2,500, to a maximum of $500 per beneficiary each year.  The lifetime maximum is $7,200 and grants are paid up to the age a beneficiary is 18.

Frequently asked questions: 

1. What happens if I miss a year?  Can I catch up on education grants if I start contributing to an RESP for my child when they are 5 years old?

You may catch up on missed grants one year at a time.  So if you contribute $5,000 this year you will get $1,000 in grants – $500 for a missed year and $500 for the current year.

2. How are funds taxed?

Funds grow tax-free in an RESP and, when withdrawn to pay for post-secondary education and related costs, withdrawals are taxed in the hands of the students.  Since most have little to no income, taxes will be low.

3. Can I have multiple beneficiaries in an RESP or do I have to open a separate RESP for each of my children?

You can have multiple beneficiaries in a family RESP and education grants can be shared amongst all the children but only up to the maximum of $7,200 per child.  If a child has received the maximum you cannot share another child’s grant with them.

4. What happens to an RESP if my child decides not to purse post-secondary education? 

An RESP can stay open for up to 35 years so if your child decides to delay their decision leave the RESP as is and the funds continue to grow tax free until withdrawn.  RESPs are flexible so you have several additional options such as:

  • Naming a new beneficiary under the age of 21 and a sibling of the former beneficiary.
  • Withdrawing the funds, when contributions made to the plan are returned tax free but government grants not used for education are returned.  Up to $50,000 of earned income can be transferred to a subscriber’s RRSP or spousal RRSP so long as there is sufficient contribution room.
  • Transfer the earnings to a Registered Disability Savings Plan (RDSP) so long as the beneficiary of the RESP and RDSP are the same.  Also, the RESP must have been in existence for at least 10 years and the beneficiary must be at least 21 years old and not pursuing post-secondary education.

5. How much money can be withdrawn?  Is there an annual limit?

For the Education Assistance Portion (grants + investment growth), up to $5,000 can be withdrawn during the first 13 weeks of a qualifying program but there are no limits after that.  For the original contributions there are no limits on the withdrawals.

6. What investments can I hold in an RESP?

Any investment that is eligible for an RRSP in a RESP.  The most ideal investments are diversified exchange traded funds (ETFs) that track global equity markets and ETFs holding fixed income securities such as government bonds, corporate bonds and preferred shares.

7. Can RESP funds be used for other expenses related to education?

Costs related to school expenses like books, housing and transportation ca be covered using RESP funds.

8. Is it better to make lump sum or periodic contributions?  

The sooner and more that you are able to contribute the better.  For those fortunate enough to be able to contribute $50,000 in year one they will gain the most even though they would only receive less in the form of education grants.

9. What is the Canada Learning Bond (CLB)?

The Canada Learning Bond is money that the government adds to an RESP for children of low-income families.  All one needs to do is open an RESP to receive an initial $500 without any initial contribution from the subscriber.  Children of low income families may also receive an extra $100 each year for 15 years until their 15th birthday for a total of $2,000.

10. When are the education grants paid in a RESP?

The government pays the education grant at the end of the following month that the contribution is made.  So if you contribute to an RESP in January the contribution is reported at the end of the month and the government takes 4 weeks to process the payment.

For those unable to contribute larger lump sums the best strategy to strive for is to contribute $2,500 per year for each beneficiary. This will be the easiest 20% you’ll ever make.  If possible it is best to contribute every January so you receive the education grants as soon as possible and have them working for as long as possible.

Sinan Terzioglu, CFA, CIM, is a financial advisor with Turner Investments, Private Client Group, Raymond James Ltd.  He served as vice-president of RBC Capital markets in New York City and VP with Credit Suisse in Toronto.

 

 

100 comments ↓

#1 jim bo on 01.25.22 at 2:02 pm

Garth! Are rates rising tomorrow or not? I need to make a decision to either switch to a fixed today! or keep at variable for a few more weeks and find a better fixed rate!

#2 Colin on 01.25.22 at 2:03 pm

Hi Sinan,

What happens if child decides to go overseas for post secondary ? Would with-holding taxes be treated differently since child is non-resident ?

Cheers

#3 All lies and manipulated u decide on 01.25.22 at 2:09 pm

#152 willworkforpickles on 01.25.22 at 1:50 pm
-The Fed at any rate is not going to raise rates enough in 2022 to bring on an economic downturn. Their smoke and mirrors play will have virtually little to no effect on stalling inflation in 2022 either.
===============================
and The LAST thing they want do, is be responsible for crashing the Canuck housing market. Its not happening.

#4 Dango on 01.25.22 at 2:19 pm

I have a feeling I already know this answer to this question, but here it goes any way.

Is it best to just contribute as much as you can to get to the $50,000 mark as early as possible, even if that means you don’t receive all of the grant money?

#5 Wrk.dover on 01.25.22 at 2:36 pm

1st Jess comes back to supply us with reading material, then Sinan comes back give the weary old guy a day off!

All for a good cause.

#6 Søren Angst on 01.25.22 at 2:44 pm

11. Are there any grants for people with no kids but have to pay taxes for those that do have kids (see above 10 as to why).

———————————

This Stealth Omicron probably worse than original Omicron (ref. early to the party Denmark)

https://twitter.com/bsant54/status/1486056913615872002

Elton John got Covid.

https://abcnews.go.com/Entertainment/wireStory/elton-john-postpones-texas-concerts-covid-19-82466601

AND…

Venice Beach (the one in Italia)

Czech chick decides to skinny dip off of Riva dei Sette Martiri, comes across a statue of a young woman on the water’s edge, goes topless next to the statue and poses for pictures.

https://edition.cnn.com/travel/article/tourist-nude-venice-war-memorial/index.html

Too stupid to know that was a war memorial to a fallen WWII Partisan woman.

https://www.google.com/maps/place/Il+monumento+alla+Partigiana+ai+Giardini/@45.4295504,12.3557559,18.28z/data=!4m5!3m4!1s0x0:0x4d9beb5af4012994!8m2!3d45.429513!4d12.3556443

€450 + get out of town for 48 hrs (I would have added “And don’t come back, ever”)

Poor Venezia. Poor Italia. All this for Turisti $$$.

—————

Learn to use Google Maps in Italia people.

#7 Sail Away on 01.25.22 at 2:44 pm

Good summary, Sinan. Two points:

-Original contributions can always be withdrawn tax-free, since they were made with after-tax funds. At every requested distribution, you (the subscriber) must designate where the funds are to be withdrawn from. These should always be designated to come from the capital appreciation and grants portion of the RESP, which are, as you mentioned, taxed at the student’s nominal tax bracket. Properly planned, the gains and grants should all or nearly all be removed with very minimal tax, leaving the untouched contributions until the end, which can then be removed tax free.

-Until recently, 2 or 3 years ago, special reporting to the IRS for dual US citizens was required. That has now been discontinued as the RESP is now recognized as protected under the tax treaty. I have the rulings/info if anyone needs, but since it’s now a non-issue, I wouldn’t expect any challenges from the US.

Our experience: our family RESP for 2 kids built to $300k by the time they hit 18. Now, after several years of distributions, it is still around $300k, because gains. Every year, we remove $30-40k and it just seems to keep regenerating, like a damaged liver. The funds remain earmarked for education, so any surplus will remain available for advanced degrees. Basically free money. Wonderful stuff.

#8 Ben Smith on 01.25.22 at 2:44 pm

Family Plan here, both kids have now gone to school, plan is still worth 650K. Last kid will be 35 in 10 years, so this plan will certainly go up to between 1-1.5M. What to do then. Even after the 50K transfer to my RRSP, it looks like I will pay a massive penalty (20% right?) and then regular income taxes on the growth. What to do? Any other tips?

#9 Dr V on 01.25.22 at 2:47 pm

RESPs – it’s all run by the Post-secondary education industrial complex. They are who benefits.

#10 Søren Angst on 01.25.22 at 2:48 pm

https://twitter.com/bsant54/status/1486047291266015233

#11 willworkforpickles on 01.25.22 at 2:48 pm

#3 All lies and manipulated u decide
“and The LAST thing they want do, is be responsible for crashing the Canuck housing market. Its not happening.”
………………………………………………………………………………………………………..

A housing market crash isn’t going to happen in 2022 not yet anyway.
The BoC has little to do with that faced with the Fed in where Canadian housing ends up.
Down the line…2023, 2024…the US Fed will have no option left them but to raise rates to historical norms as never before seen unprecedented debt level consequences and inflation pressures spiral beyond their control. Then so allowing for recession rather than the scarier alternatives by not raising rates.
Canada to follow in lockstep …
…to stay up they have to keep up.

#12 Sail Away on 01.25.22 at 2:55 pm

#4 Dango on 01.25.22 at 2:19 pm

Is it best to just contribute as much as you can to get to the $50,000 mark as early as possible, even if that means you don’t receive all of the grant money?

——–

In our case, no, because the standard contribution appreciated amply to cover all education, so capital gains on the surplus will be taxed at our nominal rate (50%+) when liquidated, so less beneficial than RRSP, TFSA, or even a standard non-reg.

#13 ogdoad on 01.25.22 at 2:59 pm

Wow, what a gorgeous day. Hit the slopes for the first time in a while and met some nice people who actually weren’t talking about covid, housing, how amazing their kids are or just looking with a comparing glare. Except for one dude….went up with him a couple times. He was nice until he watched me ski the slow line fast and lay my hips down with a killer carve run…not for everyone I guess.

Og

#14 Time to Buy A House? on 01.25.22 at 3:12 pm

Garth! I found a house I think I want to buy! Is this the worst time in human history to do this?

#15 KLNR on 01.25.22 at 3:25 pm

@#14 Time to Buy A House? on 01.25.22 at 3:12 pm
Garth! I found a house I think I want to buy! Is this the worst time in human history to do this?

folks have been saying this for 20+ years
but ya, maybe now is the worst time in human history to buy a house.

#16 A01 on 01.25.22 at 3:25 pm

So if put the max in as a lump sum, do I still get the $500 each year up until I reach the maximum ($7200) in grants.

#17 Sinan Terzioglu on 01.25.22 at 3:28 pm

#2 Colin – If a student decides to go overseas for post secondary education and begins taking withdrawals from an RESP as a non-resident of Canada any government education grants must be repaid to the government. Original contributions can be withdrawn tax free and any growth plus income over and above original contributions would be subject to a 15% withholding tax if the country as a treaty with Canada and if not the withholding tax could be as high as 25% – Sinan

#18 Sinan Terzioglu on 01.25.22 at 3:31 pm

#4 Dango – Is it best to just contribute as much as you can to get to the $50,000 mark as early as possible, even if that means you don’t receive all of the grant money?

Yes, it is best to contribute as much as you can as early as possible even if you don’t get all the education grants – Sinan

#19 Ponzius Pilatus on 01.25.22 at 3:38 pm

#9 Dr V on 01.25.22 at 2:47 pm
RESPs – it’s all run by the Post-secondary education industrial complex. They are who benefits.
——————-
I know the feeling.
Twenty years of religiously putting the money away.
And in the end it’s barely enough.
Cause of ever increasing tuition fees.
Much prefer the system in Germany, where post secondary education is free.
But still much better than the states.
Sailo is here for only one reason.

#20 Ponzius Pilatus on 01.25.22 at 3:44 pm

Just watched the Movie “Gold”.
Based loosely on the BRE-X saga.
In this uncertain times, it’s always good to be reminded of the ole adage
“If it’s too good to be true, it probably is”.

#21 Drew on 01.25.22 at 3:57 pm

How do these group providers exist? They sound like a scam

#22 Catalyst on 01.25.22 at 3:58 pm

Quality article – thank you. Two clarifying questions:

1. If you are behind and do a catchup payment, for example you skip first 5 years. Can you only recover one year worth of gov’t grants? Perhaps OK since max cap is ~14yrs worth of grants?

2. If you put $50k in year 1, do you get $500 or $7200 in grants. Assuming the latter which you’re OK with given time value of money?

Thanks in advance.

#23 BNorth on 01.25.22 at 3:59 pm

Maybe I’m missing this but if you were to put in $50k in the first year do you only get the one $500 match? Or does the gov’t contribute the $500 each year until it hits the $7200 cap?

#24 Faron on 01.25.22 at 4:03 pm

MOC $-1.2B hmmm.

#25 Loonie Doctor on 01.25.22 at 4:05 pm

#4 Dango on 01.25.22 at 2:19 pm
I have a feeling I already know this answer to this question, but here it goes any way.

Is it best to just contribute as much as you can to get to the $50,000 mark as early as possible, even if that means you don’t receive all of the grant money?

—————————————————————–
It depends on a bunch of factors. The alternative, if you have $50K sitting around after TFSA and RRSP contributions, is a taxable account. So, parental income matters, asset mix, and rate of return.

I wrote about it here.
https://www.looniedoctor.ca/2019/05/03/best-resp-contribution/

The differences are smallish. I think the biggest issue is to start early and avoid high fee group RRSPs and high-fee mutual funds.

-LD

#26 Day off for Garth? on 01.25.22 at 4:07 pm

Hope he is ok.

I am always okay. – Garth

#27 cuke and tomato picker on 01.25.22 at 4:10 pm

Providing your children with an academic education is the most rewarding experience a parent can have. We made sure our three children got their university degrees without needing to take out student loans and they THANK US REGULARLY.

#28 JSS on 01.25.22 at 4:20 pm

Canadian National Railway declares CAD 0.7325/share quarterly dividend, 19.1% increase from prior dividend of CAD 0.6150

All aboard!

#29 Sinan Terzioglu on 01.25.22 at 4:26 pm

#16 A01 – So if put the max in as a lump sum, do I still get the $500 each year up until I reach the maximum ($7200) in grants.

If you contribute the maximum of $50,000 in year one you will receive a $500 education grant for that year but no additional grants in the following years – Sinan

#30 Stealth on 01.25.22 at 4:28 pm

Thank you Sinan, very informative post.
We were also ambushed by the cst person, and pretty presentation on nice colour printed pages like a pillow.
After asking about 20 questions about the ppt I got back about 4 answers semi acceptable answers. (What is the fund invested in, rates of return, costs…)

Then i was able to found their prospectus online which was exactly 99 pages and read it until 2am.
Wrote back about 30 more questions, and never heard from them again.
I think I am banned now, no responses.

Kicker line in prospectus was that there is no guarantee if there would be any funds when kid becomes eligible and it largely depends on contributions from future children at the time. My contributions would go to sales charges and funding current education expenses.

Thanks.

#31 Sinan Terzioglu on 01.25.22 at 4:33 pm

#22 Catalyst:

1. If you are behind and do a catchup payment, for example you skip first 5 years. Can you only recover one year worth of gov’t grants? Perhaps OK since max cap is ~14yrs worth of grants?

2. If you put $50k in year 1, do you get $500 or $7200 in grants. Assuming the latter which you’re OK with given time value of money?

The maximum amount of grants the government will give in one year is $1,000 ($500 for the current year and $500 for a missed) year. So if you start contributing when your child is 5 you will need to contribute $5,000 per year to get the maximum amount and catch up.

Contributing $50,000 in year one will get you $500 in grants and no additional grants in the following years since you have contributed the maximum in year one – Sinan

#32 Brian on 01.25.22 at 4:36 pm

US war lobby fuels conflict in Russia, Ukraine, and Syria: ex-Pentagon advisor

https://thegrayzone.com/2022/01/06/us-war-lobby-fuels-conflict-in-russia-ukraine-and-syria-ex-pentagon-advisor/

Col. Doug Macgregor, an ex-Pentagon advisor, on how the US war lobby fuels conflict from Ukraine to Syria. Washington, DC, he says, is “occupied territory. It’s occupied by corporations, by lobbies.”

#33 Wrk.dover on 01.25.22 at 4:38 pm

#25 Loonie Doctor on 01.25.22 at 4:05 pm
__________________________________

Some Blog. Mega accomplishment.
Just “WOW” is not nearly enough praise.

But then I remember we are here,
philanthropists rock!
Thanks to both you and Garth.

#34 I'mshort_corpdebt on 01.25.22 at 4:47 pm

It simply amazes me that the goldbugs allow BTC and such to color code their products by stealing the beauty of the metallic luster of the true mineral that is gold.

I think the crypto folks should pay dividends to the real shiny metal industry. But I can understand that the only way the marketers of such worthless digital currency would convince fools to part with their money was to give it an appearance of something physical.

Try selling this as a product and see how it’d go:

tc bfunction fixedCharCodeAt(str, idx) {
// ex. fixedCharCodeAt(‘\uD800\uDC00’, 0); // 65536
// ex. fixedCharCodeAt(‘\uD800\uDC00’, 1); // false
idx = idx || 0;
var code = str.charCodeAt(idx);
var hi, low;

// High surrogate (could change last hex to 0xDB7F
// to treat high private surrogates
// as single characters)
if (0xD800 <= code && code <= 0xDBFF) {
hi = code;
low = str.charCodeAt(idx + 1);
if (isNaN(low)) {
throw 'High surrogate not followed by ' +
'low surrogate in fixedCharCodeAt()';
}
return (
(hi – 0xD800) * 0x400) +
(low – 0xDC00) + 0x10000;
}
if (0xDC00 <= code && code <= 0xDFFF) { // Low surrogate
// We return false to allow loops to skip
// this iteration since should have already handled
// high surrogate above in the previous iteration
return false;
// hi = str.charCodeAt(idx – 1);
// low = code;
// return ((hi – 0xD800) * 0x400) +
// (low – 0xDC00) + 0x10000;
}
return code;

#35 Faron on 01.25.22 at 4:49 pm

Did enough BTFDers step on the rug for it to get yanked again? MSFT reports very solid earnings yet is off 5.1% after hours as of right now. Ouch.

#36 greyhound on 01.25.22 at 4:55 pm

Hoo-boy — central banks are trapped. Can’t fight inflation without tanking the markets. ECB still in complete denial.
But then there are all those pesky elections: does the party in power benefit more from inflation or recession?

Wednesday’s Fed could be a come-to-Jesus moment. Make sure to have popcorn (and maybe a stiff drink) on hand…

#37 Flop… on 01.25.22 at 5:06 pm

Never had kids, so I don’t get to take advantage of this stuff.

Anyone on here got kids they want to rent out…

M47BC

#38 Sail Away on 01.25.22 at 5:06 pm

#19 Ponzius Pilatus on 01.25.22 at 3:38 pm

Twenty years of religiously putting the money away.
And in the end it’s barely enough.

Cause of ever increasing tuition fees.

…still much better than the states.
Sailo is here for only one reason.

——–

Clearly, I have been placed here both to hunt pheasants and also as divine intervention to teach proper investing if your 20 years of doing so not been sufficient.

And no, it is not better here than in the States by any stretch of the imagination. There are a number of tax-advantaged registered US education accounts. We have both US 529 Education plans and Canadian RESPs for the kids. Equally valuable.

#39 Jessica on 01.25.22 at 5:10 pm

Single parents:
1. Claim your RRSP contributions and daycare costs to get your taxable income down as close to $32,028 to max your CCB for the year.
2. Put your Income tax refund into your RESP for the year and to catch up one additional past year, if available.
2. Use your monthly CCB to finish the above RESP contribution for the year then fill up your RRSP to the Max (note you do not have to CLAIM all your contributions as you can carry them forward to use in a later year).
3. Put anything extr in your TFSA.
Watch your savings blow up!
RRSP = decreases your income tax and increases your CCB for year = double benefit
RESP = extra 20% on too of the above when you fill it with your tax refund and CCB
Note: you can always just invest your RESP in INDEX mutual funds. The important thin is to avoid brokerages that you might use for your TFSA or RRSP like Questrade as they cannot get the BC grant for you (extra $1200 per kid). Make sure to research which institution will allow you to get those extra provincial grants

#40 crowdedelevatorfartz on 01.25.22 at 5:13 pm

@#135 Ponzie’s Pal

“Genius, Pure Genius.”

++++

Praise from Ponzie.
I can die happy now.

#41 Omicron Kenobi on 01.25.22 at 5:18 pm

#26 Day off for Garth? on 01.25.22 at 4:07 pm

I have ordered Garth to self isolate today.

I am in control.

He is smart enough not to disobey me.

#42 leebow on 01.25.22 at 5:25 pm

Here is the RESP projection sheet that I use. Simplistic but close enough. Adjust as necessary or make the number of children match the spreadsheet.

https://docs.google.com/spreadsheets/d/1llznUtJpkbxXTxawrpoiIlThaLjDWPnc/edit?usp=sharing&ouid=117316100553273523812&rtpof=true&sd=true

#43 Ponzius Pilatus on 01.25.22 at 5:31 pm

#27 cuke and tomato picker on 01.25.22 at 4:10 pm
Providing your children with an academic education is the most rewarding experience a parent can have. We made sure our three children got their university degrees without needing to take out student loans and they THANK US REGULARLY.
—————-
They should.
After you sacrificed a lot for them.
Not all kids are so lucky.

#44 crowdedelevatorfartz on 01.25.22 at 5:34 pm

I believe I was pilloried and hung out to dry a few weeks back for even remotely suggesting that the Canadian Medical system was more a myth than reality.

https://nationalpost.com/opinion/why-five-million-canadians-have-no-hope-of-getting-a-family-doctor

We rank 30th in the world for health care.

30th.

#45 Sydneysider on 01.25.22 at 5:42 pm

It bears mentioning again that RESP accounts do not allow direct investment in US stocks or ETFs.

Some brokers (e.g. RBC and Questrade) do not handle the BCTESG grant of $1200, so ask before opening the RESP.

Huh? – Garth

#46 Nonplused on 01.25.22 at 5:47 pm

Good summary.

“7. Can RESP funds be used for other expenses related to education?

Costs related to school expenses like books, housing and transportation ca be covered using RESP funds.”

You can spend the money on anything you like so long as the student is enrolled. It’s sort of like child support, the government doesn’t have the time or the inclination to check receipts, the theory being that as long as the student is enrolled, the money has to come from somewhere.

Also, $50,000 is a stretch for most people, but it is also a lot of money. Tuition in Canada is not that expensive, so if a student chooses to live at home and go to a local school it can be done for a lot less than that. So save what you can and get that 20%.

Is there really that much difference between the UBC, UofC, UofS, or UofT? Or one technical school over another? Probably not. So you probably don’t as a parent have to feel obligated to save for airfare and residency if it is beyond your means. Tuition and a cheap car is probably lots. It’s way more than my parents did, and I made it.

#47 Nonplused on 01.25.22 at 5:49 pm

#2 Colin on 01.25.22 at 2:03 pm
Hi Sinan,

What happens if child decides to go overseas for post secondary ? Would with-holding taxes be treated differently since child is non-resident ?

Cheers

————————-

If you or your child has money for that, the grants are probably a rounding error in your personal finances.

#48 Loonie Doctor on 01.25.22 at 5:54 pm

#33 Wrk.dover on 01.25.22 at 4:38 pm
#25 Loonie Doctor on 01.25.22 at 4:05 pm
__________________________________

Some Blog. Mega accomplishment.
Just “WOW” is not nearly enough praise.

But then I remember we are here,
philanthropists rock!
Thanks to both you and Garth.
——————————————————————

Thanks! I honestly can’t wait to get back to writing once my regular job settles down again. I have to credit Garth for much of my basic investing knowledge. The rest is simply my nerdiness and love affair with Excel.
-LD

#49 DonM on 01.25.22 at 6:05 pm

What if you don’t have children?

#50 Upenuff on 01.25.22 at 6:07 pm

#6 Søren Angst on 01.25.22 at 2:44 pm

Fined and kicked out of town! Posing at a war memorial nude.

Move along people, nothing to see here but another stupid people trick…..

Upenuff

#51 Nonplused on 01.25.22 at 6:14 pm

#6 Søren Angst on 01.25.22 at 2:44 pm

“11. Are there any grants for people with no kids but have to pay taxes for those that do have kids (see above 10 as to why).”

No. But there should be an extra tax on people with no kids to help fund their CPP and OAS shortfalls.

I often here people with no kids complain about the property taxes they pay that go to the school boards. But here is the thing: You are just as much paying off your own education as paying for anyone else’s. It wasn’t exactly free to put you through school either.

And since educated people on average have higher incomes and thus pay higher taxes than the uneducated, the government probably gets their grant money back and more no problem over time. Your non-existent kids on the other hand won’t be paying any tax, so you probably owe more than you are paying to make up the shortfall.

#52 Barb on 01.25.22 at 6:33 pm

Awwwww….dog photos don’t get any better than that!
Even Felix, the omnipresent dog hater, can’t beat that pic!

“Canadians C.S.T. Consultants and Canadian Scholarship Trust Foundation and not understanding the high enrollment fees and sales charges. They’re outrageous and can amount to 20%+ of contributions.”

Disgusting, akin to mutual fund charges.
As in all things, buyer beware.
Thanks Sinan for shining a light on those!

Sending your excellent post to our daughter and son-in-law.

#53 Sail Away on 01.25.22 at 7:00 pm

#52 Barb on 01.25.22 at 6:33 pm

Thanks Sinan for shining a light on those!

Sending your excellent post to our daughter and son-in-law.

——-

Relationship tip of the day: sending $ along with MIL financial advice makes the advice far more palatable

#54 Ponzius Pilatus on 01.25.22 at 7:15 pm

#44 crowdedelevatorfartz on 01.25.22 at 5:34 pm
I believe I was pilloried and hung out to dry a few weeks back for even remotely suggesting that the Canadian Medical system was more a myth than reality.
https://nationalpost.com/opinion/why-five-million-canadians-have-no-hope-of-getting-a-family-doctor

We rank 30th in the world for health care.
30th.
———————–
Always double check your Google searches:

/ News
Canada’s Health Care System Just Ranked Among The Best In The Whole World
We’re in the global top five!
Helena Hanson
 December 20, 2021, 01:59 PM
The data, compiled by U.S. News and shared in April 2021, ranked Canada in fourth place globally when it comes to our health care.

It was Sweden that took the top spot, with Germany coming in second place. Denmark took third place in the global ranking.

In fact, Canada took the top spot overall when it came to U.S. News’ ranking of the best countries in the world, which is based on factors including social purpose, women’s experience, racial equality and more.

It’s not the first time Canada’s health care has been recognized on a global scale, either. Earlier this year, the country was found to be home to six of the world’s top health centres, four of which are in Toronto alone!

#55 yvr_lurker on 01.25.22 at 7:23 pm

#9 Dr. V
RESPs – it’s all run by the Post-secondary education industrial complex. They are who benefits.
——
I would have expected better from you. Indeed, if one uses them to focus on Vampire Studies at UVIC (like your acronym) or something not so employable, then likely the institution wins. The student learns something for sure and their mind expands, but so good for the market. Using the RESP for a degree in data science, engineering (some branches better than others), comp sci, econonics, etc or professional program from an ACCREDITED school (we are not talking about Sprott Shaw college here) is clearly worthwhile.

However, for those students who have been endowed with large family trust funds, or will inherit property etc.., they have more of an option for pursuing Vampire studies, or drama or… Perhaps they can be a prime minister one day. Frightening.

#56 Michael in-north-york on 01.25.22 at 7:34 pm

Great guidance. Though I disagree with #8.

“For those fortunate enough to be able to contribute $50,000 in year one they will gain the most even though they would only receive less in the form of education grants.”

That’s only true if you just look at the RESP size and ignore all other assets. If you want to increase the total wealth of the family, you will pursue another strategy. Especially if you have unused contribution room in your TFSA or RRSP.

Let’s say you have 35k of unused room in your TFSA. Then, instead of putting 50k in your child’s RESP, you can put 15k in the RESP and 35k in your TFSA. For the next 14 years, take $2,500 per year from the TFSA and put them in the RESP.

That way, your original 50k still grow tax-free. And, you milk the government for the whole $7,200 of the education grant.

#57 Daveyboy on 01.25.22 at 7:34 pm

Wish I had this Blog back in high school! I actually learn something that I can put to use.

https://www.youtube.com/watch?v=sNXHSMmaq_s&ab_channel=ComedyBoutique

#58 Oncebitten on 01.25.22 at 7:37 pm

If I buy a car for my 16 year old now and keep it in my name, can I sell it to them when they start post secondary and use the money from the TFSA to pay for it? Can I use $ from the TFSA to pay for room and board if they are living at home?

#59 Michael in-north-york on 01.25.22 at 7:42 pm

#21 Drew on 01.25.22 at 3:57 pm
How do these group providers exist? They sound like a scam
===

So true. They prey on young families, the newcommers or the people who aren’t very numerate / versed in finances.

They should be banned outright, or at least required to provide an extensive disclosure.

I was lucky to avoid them, and went with plain mutual-fund RESPs in one of the major banks. Some of my work colleagues fell for them, and I couldn’t give a warning because the deed was already done before I heard about that.

#60 Sidewinder Slim on 01.25.22 at 7:59 pm

I got lucky with my kids RESP. I topped it up with a variety of gold issues just before gold went boom. He graduated debt free with a surplus for grad school.

I think once Canada gets past Trudeaus economic wrecking ball there will be other boom times and sectors to play catch up that have been slaughtered by his crazy naive policies.

If I was to do the same again I’d be focused on the energy juggernaut that’s steamrolling the petulant luddites. Oil demand is growing exponentially, there is no viable alternative, unless you want a master/slave world where Trudeaus organic fare is flown in while you snatch worms from the killing fields.

Look at this week, oil is up, stocks are down? The cash these companies are raking in defies the crash mentality of “ Super crash Grantham” ( or whatever his name) . I’m actually giddy . It’s too easy. The last time money was hanging off the trees was when gold took a jump and I was just riding by to catch it.

Anyway, I’m just sayin’.

#61 Derek on 01.25.22 at 8:01 pm

Does anyone have a recommendation for the best RESP provider that supports the BCTESG?
I normally use Questrade who don’t support it.

#62 Sinan Terzioglu on 01.25.22 at 8:07 pm

#56 Michael in-north-york – Thank you for your comments. I agree that if you want to increase the total wealth of your family you should consider unused TFSA and RRSP contribution as well – Sinan

#63 Dr V on 01.25.22 at 8:21 pm

55 lurker

“Using the RESP for a degree in data science, engineering (some branches better than others), comp sci, econonics, etc or professional program from an ACCREDITED school (we are not talking about Sprott Shaw college here) is clearly worthwhile.”
———–

Good evening lurker. 6 years post sec myself, and one of
those useful degrees.

Mom made it clear. You work harder at it when YOU are paying for it. No RESP for me. Best I got was “free rent” for 2 of those 6 years at a community college.

I am very cynical when it comes to the PSEIC. The pressure put on parents today to save for juniors PSE
even though junior may do better as a pipefitter. We
need those too. I believe you can use an RESP to pay for trade school.

#64 Wrk.dover on 01.25.22 at 8:23 pm

#58 Oncebitten on 01.25.22 at 7:37 pm
If I buy a car for my 16 year old now and keep it in my name, can I sell it to them when they start post secondary
________________________________

Now that is some optimism!

#65 Ponzius Pilatus on 01.25.22 at 8:26 pm

Sailo,
I hear VW and BOSCH are teaming up to take on TESLA.
Whats your take on this?

#66 Satori on 01.25.22 at 8:35 pm

#49 DonM on 01.25.22 at 6:05 pm
What if you don’t have children?
____________________
Don, isn’t it obvious? You get a dog!

#67 David W2 on 01.25.22 at 8:47 pm

Well summarized. Thank you!

#68 BC Doc on 01.25.22 at 8:55 pm

Thank you for the column Sinan.

One resource I’ve found super helpful as a reference are author Mike Human’s two RESP books which are available as Kindle downloads. I access the books once or twice a year if I’m contributing to or withdrawing from the family RESP.

The government folks at HRSDC (now Employment and Social Development Canada) are also very helpful with any specific plan questions.

BC Doc

#69 Flop… on 01.25.22 at 8:56 pm

I hope that giant telescope can find our collective marbles, because it feels like we lost them somewhere…

M47BC

#70 crowdedelevatorfartz on 01.25.22 at 8:57 pm

@#54 Politically Correct Ponzie

“Canada took the top spot overall when it came to U.S. News’ ranking of the best countries in the world, which is based on factors including social purpose, women’s experience, racial equality and more.”

My apologies.
We ranked 10th in the world not 30th.
But can 5 million doctorless Canadians even rank the medicare system?

https://www.canhealth.com/2021/09/30/canadas-healthcare-system-scores-poorly-against-peers/#:~:text=The%20Commonwealth%20Fund's%202021%20report,was%20at%20the%20very%20bottom.

Now maybe I can find a doctor to give me a shot of gravol to cure me of my nausea after reading that pc pabulum you offered forth.

#71 Northshoreeng on 01.25.22 at 8:59 pm

I think these questions were answered. Just making sure:
1. Resp matching based on calendar year (not like rrsps)
2. If resp registered/held within a big bank, and you have filed your grant applications, the 20% is automatically deposited one month after contribution.

Example, I opened/transferred/invested 2500$ Dec 15 2021 to a self directed resp, so I should have 500$ deposited momentarily, for 2021 tax year. And if I put another 2500$ in today (January 25), I get the full eligible matching grant money I applied for (2022 tax year). Only getting the base grant money.

#72 TurnerNation on 01.25.22 at 8:59 pm

QQQ touched a Daily chart support level afterhours, back MSFT news. Futures bounced a bit off it.

— The Dolce Files. Italy. A “Pandemic” so dire that they fire the doctors. This sounds more like a reset to wipe out the middle classes??

https://apnews.com/article/coronavirus-pandemic-health-business-italy-europe-d70a4f1ca164ac4f6b8d51c0ca3fb136
“ROME (AP) — Some 1,900 Italian doctors and dentists have been suspended from the country’s professional association because they haven’t complied with a law requiring them to be fully vaccinated against COVID-19, including having a booster shot.
That amounts to 0.4% of total membership, but the federation says some 30,000 other members still haven’t completed their vaccinations. ”

— Almost back to normal guys! This is both sad and funny. Humans within plastic cubicles while shopping,
God our global rulers love humiliating us.

https://mobile.twitter.com/Roman_Baber/status/1485688212521730050
“Cubicles for Quebecers who made a different medical choice inside a Quebec Walmart. Designed to wait for an associate to be escorted to the pharmacy section.”

…which is like just this:

https://en.wikipedia.org/wiki/Minder
Government-appointed persons to accompany foreign visitors are often termed minders… Often they are perceived as also attempting to censor or otherwise control the flow of information to the visitor.[1][2] Government appointed minders are used in North Korea.[3]

#73 TurnerNation on 01.25.22 at 9:30 pm

War on Small Business.
— So close to normal guys. NOT a chance. They will order a 3rd, 4th, etc – to crush small businesses — when they lose their patrons.
This will be 2.5 (two and a half) years into it, by then:

.(Global) “B.C. is extending its vaccine card program until June 30, provincial health officer, Dr. Bonnie Henry said Tuesday.

.Doug Ford says he can’t see Ontario mask mandates lifting anytime soon (globalnews.ca)

—-
— A taxi driver told me he got back from a month home in India. He described it as normal life over there. Not even a mask in sight. That what’s going on here is all political. Ironic that a 2nd World country would have more freedoms than us here.

— Our Masters are in a fine mood today, we are so lucky. Thank you Sire may we have another??

.Montreal Quebec announces plan to reopen restaurants, cinemas in coming weeks. Sill no word for bars and gyms, which have been closed since late December (cbc.ca)

#74 Sail Away on 01.25.22 at 9:31 pm

#58 Oncebitten on 01.25.22 at 7:37 pm

If I buy a car for my 16 year old now and keep it in my name, can I sell it to them when they start post secondary and use the money from the TFSA to pay for it? Can I use $ from the TFSA to pay for room and board if they are living at home?

———

I assume you mean RESP, not TFSA?

If so, as Nonplused mentions, you/your kid can do whatever floats your boat with the RESP funds as long as the kid is verifiably registered as a full time student. There are no RESP police.

#75 Sail Away on 01.25.22 at 9:35 pm

#58 Oncebitten on 01.25.22 at 7:37 pm

If I buy a car for my 16 year old now and keep it in my name, can I sell it to them when they start post secondary and use the money from the TFSA to pay for it? Can I use $ from the TFSA to pay for room and board if they are living at home?

———

I assume you mean RESP, not TFSA?

If so, as Nonplused mentions, you/your kid can do whatever floats your boat with the RESP funds as long as the kid is verifiably registered as a student. There are no RESP police.

#76 Sail Away on 01.25.22 at 9:49 pm

#65 Ponzius Pilatus on 01.25.22 at 8:26 pm

Sailo,
I hear VW and BOSCH are teaming up to take on TESLA.
Whats your take on this?

———

Good for them. They have always had an entirely open and fair field for competition. Nothing between them and Tesla but air and opportunity.

#77 Ronaldo on 01.25.22 at 9:50 pm

If you are living in BC, there is a one time grant of $1200 that you can apply for when the child turns six years of age. It is called The BC Training and Education Grant. We have gotten this in addition to the $500 which the government provides when we make the $2500 installment. This does not come automatically. It has to be applied for. See link.

https://www2.gov.bc.ca/gov/content/education-training/k-12/support/scholarships/bc-training-and-education-savings-grant

#78 Shawn on 01.25.22 at 10:00 pm

RESP ?

#9 Dr V on 01.25.22 at 2:47 pm

RESPs – it’s all run by the Post-secondary education industrial complex. They are who benefits.

********************
I did okay. Contributed $69,997 over a period of years. Got $12 824 in grants. Took out $148,000 so far, Sent one kid to Nova Scotia and then Australia for masters. The other to B.C. Got $73,586 left at least check.

Need one kid to go back to school which they can do to about age 35.

Both kids got jobs, one with government DB pension. Family tradition. Rock on.

#79 Doug t on 01.25.22 at 10:14 pm

RESP ? How about RIP, the way this country is going kids don’t stand a chance in the future

#80 B on 01.25.22 at 10:16 pm

You should be charging for this info!

#81 Doug t on 01.25.22 at 10:18 pm

#27 cuke and tomatoes

Well you just keep polishing that trophy on your mantle cuke – have you ever consider 5g of shrooms for a lifetime wake up ?

#82 Ronaldo on 01.25.22 at 10:29 pm

#79 Doug t on 01.25.22 at 10:14 pm
RESP ? How about RIP, the way this country is going kids don’t stand a chance in the future
——————————————————————
Doug, people were saying the same thing back in early 70s when we had our first child. They would say “why would you want to raise kids in this day and age?” Seems to have worked out well for our kids.

#83 yvr_lurker on 01.25.22 at 10:30 pm

#63
Mom made it clear. You work harder at it when YOU are paying for it. No RESP for me. Best I got was “free rent” for 2 of those 6 years at a community college.

—-
Point taken. I had zippo saved for me when I went to college, but scholarships and a lower tuition saved the day. It seems a different universe now and so having an RESP is key. Coming out of school with high level training in an emplyable field, but owing 50-100K in school debt, will take some years to pay off. Then, the idea of saving for a downpayment etc etc… (which is today’s landscape is off the charts) adds to much higher burden than me and my peers experienced years ago. Better for parents to have planned for an RESP to help defray costs. No brainer. Go to a trade school, whatever, but need some advanced training.

Cancel all of the above if you want if you have come from a family with rich parents who have set you up with a trust fund and an inherited house. I have a few friends who were in that group.

#84 Barb on 01.25.22 at 10:39 pm

#53 Sail Away
Relationship tip of the day: sending $ along with MIL financial advice makes the advice far more palatable
———————————————

Dun dat, thanks.

And homemade chicken noodle soup when SIL was under the weather. It’s just as well his sense of smell hasn’t returned since falling ill…I left the bay leaf in there too long.

#85 Sydneysider on 01.25.22 at 10:43 pm

#45… Huh? – Garth

Banks do not offer US dollar RESP accounts. No doubt the origin of this rule lies somewhere in an income tax regulation, but I was unable to find it. Maybe this rule should be changed if the former finance minister is not aware of it.

“Am I able to hold U.S. dollars in Registered Education Savings Plans (RESPs)?

No. The ability to hold U.S. dollars is not available for RESPs at present because of the additional complexity of RESPs. ”

https://www6.royalbank.com/en/di/reference/article/Dual-currency-FAQs/j6h46nvm

“Scotia iTRADE recently introduced U.S. dollar-registered accounts, and once you are approved for the program, you can trade U.S.-denominated securities in a registered account for free. All registered accounts except RESPs come with two sides, a Canadian dollar and U.S. dollar side.”

https://www.benzinga.com/money/scotia-itrade-review/

Questrade does allow a pseudo-US dollar account (with additional trading fees) that allows you to buy US equity, but behind it is really a CAD account.

#86 Oncebitten on 01.25.22 at 11:08 pm

#75 Sail Away

Oops! Yes I meant RESP. Thanks for the reply!

#87 Indigirl on 01.25.22 at 11:15 pm

Great column.
But people need to know to deal with the RESP in their will. The plan collapses upon the death of the subscriber. You need the right words in your will. Hence, only parents should be the subscribers and they should be joint subscribers. I made that mistake. I was bossy pants in charge of finances so it was in my name. Separated, moved out and only then realized I couldn’t add my almost ex-spouse as a joint subscriber because we no longer lived together.

#88 Cici on 01.25.22 at 11:46 pm

Great info tonight. Thank you!

#89 Dr V on 01.26.22 at 1:32 am

https://worldpopulationreview.com/country-rankings/most-educated-countries

Draw your own conclusions.

I’ve drawn mine.

#90 crowdedelevatorfartz on 01.26.22 at 8:24 am

@#69 Flop
“I hope that giant telescope can find our collective marbles, because it feels like we lost them somewhere…”

+++

No chance.
It’s pointed away from planet Earth.
No intelligent life here.

#91 Shawn on 01.26.22 at 8:47 am

RESP and studying abroad

#17 Sinan Terzioglu on 01.25.22 at 3:28 pm said

#2 Colin – If a student decides to go overseas for post secondary education and begins taking withdrawals from an RESP as a non-resident of Canada any government education grants must be repaid to the government. Original contributions can be withdrawn tax free and any growth plus income over and above original contributions would be subject to a 15% withholding tax if the country as a treaty with Canada and if not the withholding tax could be as high as 25% – Sinan

************
When a dependent studies in another province or even country I don’t think Canada Revenue has any issue with claiming their Home province as place of residence for tax purpose whether they come back for Christmas break or not.

I had no problem getting TD Bank to recognize Macquarie university in Australia as valid for RESP. (Though proof of enrollment full time was certainly required). My student was there almost a year but back by December 31 so I continued to claim Alberta residence.

I am confident Canada Revenue has no issue with this. And if I somehow bent the rules, well I never claimed to be a Saint.

#92 crowdedelevatorfartz on 01.26.22 at 9:43 am

@#89 Dr V

Sooo
Canada has more people with Bachelor of Psychology and Arts degrees than the rest of the countries of the world?
Plus huge student debt to top that “degree” from the “factory”.

And we’re sorely lacking trades in all areas of construction.
And gender equality is almost a mandate for hiring.

Male or female Apprentices that “earn while they learn” and graduate with zero debt and their pick of jobs for the rest of their lives if they’re any good?
Stepping out of 4 years of trade school with money in the bank , no debt and years of work stretching out ahead of you.
Sounds like a no brainer to me.

#93 Penny Henny on 01.26.22 at 9:59 am

#49 DonM on 01.25.22 at 6:05 pm
What if you don’t have children?

///////////////

No soup for you!

#94 Dharma Bum on 01.26.22 at 10:11 am

Got one of those make-work-project home “energy efficiency inspectors” coming over to the kid’s house in Red Deer today. They’re coming in from Edmonton.

Gotta pay them up front – several hundred bucks to do the “inspection” – in order to qualify for the applicable maximum rebate on any energy saving home improvement work. The rebate is in the neighbourhood of $5000.00, and you also get reimbursed for a significant portion of the money spent for the inspection, so it seems like a decent deal overall.

Gonna replace a bunch of old slider windows. Man, they frosted up like a bastard during that deep freeze Alberta had a month ago. Ice formation all around the framing and glass.
Time for some modern insulated PVC framed thermal casement windows.
I like free money from the government to upgrade a house.
That’s an even better deal than the 20% grant up to $500 per year.

Although, back in the day, I had RESPs in place for all of my children – maxed out the grant every year.
Either way, I had to top it up significantly. Good schools with good programs are seriously expensive, even by Canadian standards.

Save your money, parents. The kiddos are gonna need it!

#95 Sail Away on 01.26.22 at 10:18 am

#91 Shawn on 01.26.22 at 8:47 am

I had no problem getting TD Bank to recognize Macquarie university in Australia as valid for RESP. (Though proof of enrollment full time was certainly required). My student was there almost a year but back by December 31 so I continued to claim Alberta residence.

———

Yes, similar with our daughter in NZ. I expect it might be complicated if the subscribers were also nonres, or if either her or our bank accounts were foreign, since I still have to visit the bank holding the RESP in person with paperwork for each distribution.

The US 529 education plans are simpler. Forward enrollment/tuition/residence school-related invoices and they pay the invoices directly, completely tax-free to all.

#96 Dr V on 01.26.22 at 10:54 am

92 fartz – yep. The whole thing is designed to keep kids in school as long as possible.

#97 Ronaldo on 01.26.22 at 11:34 am

#93 Penny Henny on 01.26.22 at 9:59 am
#49 DonM on 01.25.22 at 6:05 pm
What if you don’t have children?

///////////////

No soup for you!
————————————————–

■ Family plans allow the subscriber to
name one or more beneficiaries in the
same plan. These plans require that each
beneficiary be related to the subscriber
by blood or adoption, and can include a
child, grandchild, step child/grandchild or
sibling. One of the main advantages of this
type of plan is that the funds in the plan do
not have to be shared equally among the
beneficiaries, giving you more flexibility
when it comes to making withdrawals.
■ Individual plans have only one beneficiary.
The beneficiary can be anyone — including
your child, grandchild, step child/
grandchild, niece, nephew, family friend,
you or your spouse

#98 The Awakened One on 01.26.22 at 1:30 pm

Great read, very educational, thanks Sinan!

Cute doggo photos too, maybe you’ll win more hearts from the BlogDogs.

#99 Diamond on 01.26.22 at 3:46 pm

Be very careful when pulling money out of the RESP for education costs. My child did not use all the funds for education. Because the grant money was not pulled before or along side the invested amounts we missed out on several thousand dollars when we closed the account. The paperwork at the time was not explicit in how the withdrawals were handled.

#100 TerziogluTerritory aka Prince Polo on 01.27.22 at 6:43 am

You got to 100! Great work, Sinan.