Paying for the Kid’s Education (RESP)

As I was doing my estimates for retirement, it occurred to me that I was planning to retire exactly as my kid will be in post secondary education. So how can I do both? Simple I don’t plan to pay for my kid’s entire education.

It’s not that I’m not going to help, but I didn’t have my entire education paid for, so why would I pay for all of my kid’s education? I personally found that when my parents stopped paying the bill my spending dropped by about $2000/year. It forced me to question my spending habits and really made me think “Do I really need to buy this?”

I personally found the easiest way to fund a RESP for my kid is to take the Child Tax Benefit and that $100/month from the Federal Government and pour it into a RESP to receive the Education Saving Grant . In my case, that works out to $120/month of government’s money that is then topped up to $150/month. So it costs me nothing until the kid no longer qualifies for the $100/month at which point I will continue to fund that amount in every month.

As to where to put the money. I suggest you read the following from the Canadian Capitalist, which is a great post with links to many helpful resources.

2 thoughts on “Paying for the Kid’s Education (RESP)”

  1. I just read this post and I’m reposting a previous comment/question because I think it fits better here.

    I recently read that the child tax benefit is one of the few sources of income that the CRA allows to be held in the name of your child’s name for the purposes of investing.

    Because of attribution rules if you give money to your child to invest with, it should be claimed on your taxes and capital gains / interest should be paid at your marginal tax rate.

    Of course there is no taxation on an RESP account, so aren’t you losing that benefit by depositing your child’s CTB in there instead of putting all of your own money into the RESP and putting their CTB into their own separate investing account?

    You could even file taxes for your child on any returns they make on their investment so that they build up some free RRSP contribution room for the future.

    What do you think?

  2. Jordan,

    It’s possible, but I think it might not be worth the effort to get it all setup and maintain. It’s fair amount of hassle and your time to do it all for a low tax benefit in my mind.

    So you have to ask “what is my time worth?” and then decide. In my case, no it isn’t worth it.


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