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The Real Reason Parents Refuse to Use the RESP as a Savings Tool

Are 50% of parents not using RESP to save for their child’s education because of restrictions on where their child can go to school and what they can study?

In 2015 only 50.1% of parents in Canada which children who qualified for an RESP opened one to save for their child’s future education.

While there could be many factors why 50% of parents aren’t opening RESP plans for their children’s future education, could one of the reasons be the stories in the media and amongst families and friends on the surprise they get when they tried to access their RESP plans to help pay for their child’s education program, but find out that they aren’t “approved”?

Parents are continuously bombarded by media and told by RESP sales representatives and advisors that they can use their RESP for any university or education program their child will want to attend at 18 anywhere in the world. Is that correct according to the RESP “rules” listed on the government website administering the RESP?

The Canada Revenue Agency (CRA) is the government department who oversees all the RESP accounts and plans in Canada.

According to the CRA website under the “Educational Assistance Payments” section, the RESP promoter which could be a group RESP company or a bank, can only pay the government education matching grants in the RESP to the parent to help pay for their tuition if “the student is enrolled in a qualifying educational program”.

That means that the government must first qualify and approve the school or program and then set the school or program on the RESP approved list of designated institutions. Only once it’s listed as approved education institution or programs can the RESP grants the government gave you for your child’s education be used.

Let’s look at one example; “Pharma-Medical Science College of Canada” was founded in 2003 and is one of the leading pharmaceutical career colleges in North America.
According to the RESP approved list of education programs and colleges this college was only approved as a recipient of Education Assistance Payments (RESP grants) in July 11, 2016.

If parents are advised by RESP providers that they can use the RESP government grants they received over 17 years (AKA Education Assistance Payments) for any education program or university in Canada or the world, then were children who wanted to attend this college and earn a degree in pharmaceutical science before July 11, 2016 able to do so? No!

Those children who wanted to attend this college and programs before it was approved by CRA could not use the RESP grants towards tuition. While their parents can certainly pull the money they deposited out to pay for the program, the grants would have to be returned to the government if at the end they don’t attend an approved university, college or post secondary education program.

50% of parents are getting smarter about asking the key question about RESP. Are there any rules or restrictions on how they use the RESP for their child’s education?
The answer is yes!

Ask your RESP advisor or sales agent or do your own research. We don’t want disappointed children after 18 years of hard savings.

Child Plan™ is Canada’s fastest growing alternative to RESP. It’s a secure and flexible way to invest in your child’s future.

Sample illustration of Child Plan™ Cash and Insurance Values

Based on a Monthly Deposit of $225 per month

Age Accumulated Cash Value Life Insurance Value
20 $80,448 (Education) $770,802
35 $184,850 (House) $1,070,880
45 $325,714 (Security) $1,343,568
65 $964,321 (Retirement) $2,082,564

Sample illustration is based on a $225 monthly premium for twenty years, starting when the child is less than 1. Cash and life insurance values are based on the current dividend scale of 6.0% from a Canadian Life Insurance Company. This example is strictly for illustrative purposes only, the annual dividend scale is not guaranteed and values may differ.

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*illustrations are reflective of the annual premium amount

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