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Canadian parents don’t like free government money. 47% of parents have yet to open a Registered Education Savings Plan (RESP) according to a new survey by the Chartered Professional Accountants of Canada. An RESP is easily the best way to save for your child’s education since the money is tax-free, and the government offers a Canadian Education Savings Grant (CESG) to help with your savings.

The CESG provides a match equal to 20% of any contributions you make annually up to a maximum of $500 a year. There is a lifetime limit of $7,200 per child, but no matter how you look at it, it’s free money that many parents aren’t taking advantage of.

Take advantage of free government money with RESPs

What’s stopping parents from contributing?

Considering that Canadians have record debt levels, the simple answer could be a lack of money. “There are so many demands for our cash – the mortgage or rent, transportation, food and clothing ” says David Trahair, a chartered professional accountant and financial author. “After all that, many people find they don’t have any extra cash to invest in an RESP to fund their child’s education.”

It’s also clearly a lack of awareness. 80% of parents reported that they had started saving for their child’s post-secondary education and yet only 53% have set up their RESP. So what exactly are the 27% not using an RESP doing? There’s no hard evidence but I would imagine they are using some kind of savings account. This is an awful idea, even if they’re investing in a TFSA, it still doesn’t make any sense since they aren’t taking advantage of the benefits of the CESG.

Is housing to blame?

There’s no hard evidence, but you better believe that the high price of real estate in Canada is responsible for the increased debt-levels of Canadians. 40% of first-time home buyers expect help from their parents with their down payments, according to a report done by BMO. Is it possible that parents are prioritizing housing over education? Is this the right thing to do?

“It’s my opinion that a parent should help their child pay for the post-secondary education rather than helping them save for a house” says Allan Small, Senior Investment Advisor at Allan Small Financial Group, HollisWealth. “It’s more important for a child to receive help to obtain a good education so they can go out and get a well paying job, and to one day afford their own house”

Statistics Canada says the average undergraduate degree tuition in 2013/14 was $5,772 and that doesn’t include anything else e.g. books, housing, meals, supplies. That’s a lot of student debt that can be picked up over a course of 4 years. Graduating debt-free is probably more important than buying your first home.

free government money child

Start Saving now

The key to making sure that you’ll have enough saved to fund your child’s post-secondary education is to start early. “If you start an RESP and invested $2,500 a year from when your child was born to age 16, you would have contributed $47,200” says Trahair. “If you made an average rate of return in your RESP of 3.45% per year after fees, the total value would build to $64,000.”

Parents can also make RESPs a part of their financial plan by simply setting up automatic payments. “By contributing this way, parents don’t really need to worry about coming up with cash by years end” says Small. “Each month a contribution is made directly from the parents bank account to the RESP and invested right away.” By using this strategy, parents can avoid some risks since they’ll be dollar cost averaging.

Low-income families can access up to $2,000 of free government money without having to put in any of their own money through the Canada Learning Bond. Once your application is approved, the Canada Learning Bond will be deposited directly into your child’s RESP every year that he or she is eligible.

Final word
There’s no doubt about it, Canadians inability to save is now having a direct affect on our children. Housing has obviously played a huge role and what’s most concerning is that we’re currently sitting at record low interest rates. Even a small increase in rates can cause serious cash flow problems for many parents. The CESG is free government money, it’s foolish to not take advantage of it.


  1. Brian So on May 4, 2015 at 9:52 AM

    It’s hard to say no to free money, but other expenses may be tugging at the parents’ purse strings such as RRSP and TFSA contributions and like you mentioned, the rising costs of housing. It is tough for most people to maximize all of their tax sheltered investment accounts and prioritizing education vs retirement fund is as important as ever.

    • Barry Choi on May 4, 2015 at 10:06 AM


      The worst part about the survey was how 80% is saving for their child’s education, but they aren’t all using a RESP. Why wouldn’t they use it?

  2. Stephanie@t he money savvy blog on May 4, 2015 at 11:18 AM

    There is also the question as to whether it is a parents’responsibility to pay for their children’s education in the first place. It is a big debate. I personally think it is better to be able to retire than being able to pay for tuition fees. Most children won’t be able to pay for their parents’retirement…

    • Barry Choi on May 4, 2015 at 11:30 AM


      That’s a good point. If it jeopardizes your retirement lifestyle, I agree, let the kids figure it out. Many of the parents helping kids with education or down payments could be hurting their own retirement.

  3. Tawcan on May 4, 2015 at 5:52 PM

    I don’t understand why people say no to free money then complain that they don’t have enough money to go by. Give your head a shake!

    • Barry Choi on May 4, 2015 at 5:54 PM


      Maybe they just enjoy wasting money?

  4. Our Big Fat Wallet on May 6, 2015 at 2:21 PM

    I have found for young families its a matter of budgeting and cash flows. Free money is always nice but other priorities (i.e. daycare, vehicle maintenance, house maintenance etc) get in the way

    • Barry Choi on May 6, 2015 at 3:05 PM

      Our Big Fat Wallet,

      Cash flow is definitely the biggest issue. Although other costs do get in the way, it can help to plan for future expenses before they come up.

  5. Sean Cooper, Financial Journalist on May 8, 2015 at 9:58 PM

    I wish RESPs were around when I was growing up. My parents invested $200 in Canada Savings Bond. It didn’t even cover my textbooks for the first semester. While I’m all for saving for your child’s education, it shouldn’t come at the expense of your own retirement savings.

    • Barry Choi on May 8, 2015 at 10:05 PM


      Yes parents too often put their kids above their own retirement planning and that is a huge mistake.

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