The math should be sobering for any parent with post-secondary dreams for their children. While most Canadian families recognize that university or college education comes with a hefty price tag, few grasp just how dramatically timing can impact their savings outcome.
Let me paint the picture with real numbers. A family that begins contributing to a Registered Education Savings Plan (RESP) when their child is born versus waiting until that same child turns ten isn’t just losing a decade of deposits – they’re potentially sacrificing nearly $100,000 in educational funding.
“The power of compound growth in an RESP is routinely underestimated,” explains Natasha Kovacs, a certified financial planner with FamilyWealth Advisors in Toronto. “Parents often prioritize immediate expenses and delay education savings, not realizing that those first years represent the most powerful growth period.”
When I ask parents at community financial literacy workshops why they haven’t opened an RESP, the answers reveal a pattern: competing financial priorities, confusion about the process, or simply not understanding the mathematics of delayed action. Yet the Canada Education Savings Grant (CESG) – where the government contributes 20 cents for every dollar families invest up to $2,500 annually – creates a guaranteed 20% return before any investment growth.
Consider two families with identical financial situations. The Garcias open an RESP when daughter Maya is born, contributing $2,500 annually to maximize the CESG. The Thompsons, with son Ethan, wait until he’s 10 before starting the same contribution pattern. By age 18, assuming a conservative 5% annual return, Maya’s education fund will contain approximately $87,000, while Ethan’s will hold roughly $25,000.
But that gap widens dramatically if Maya’s parents manage $3,600 annual contributions (the maximum amount that receives partial matching) from birth. Their discipline could result in a fund exceeding $120,000 – a six-figure education nest egg that dramatically reduces potential student debt.
According to Statistics Canada, the average undergraduate degree now costs approximately $28,000 in tuition alone for a four-year program. Add residence fees, books, and living expenses, and most students face costs exceeding $80,000. Meanwhile, the average student debt for Canadian graduates hovers around $28,000 – an amount that can take more than a decade to repay.
“What we’re really talking about is purchasing future freedom,” notes Dr. Amelia Richardson, an economist specializing in education financing at the University of British Columbia. “Every dollar in an RESP potentially represents several dollars a graduate won’t need to repay with interest during their prime earning and household-formation years.”
Beyond the headline-grabbing $100,000 potential, there are additional benefits to early RESP contributions that rarely make financial headlines. Families with modest incomes may qualify for the Canada Learning Bond, providing up to $2,000 in additional government contributions without requiring matching deposits. Additionally, RESP funds can be transferred between siblings if one child requires less educational funding than anticipated.
The flexibility extends to investment options as well. Parents with young children can initially select growth-oriented investments, gradually shifting to more conservative options as university approaches. This age-appropriate investing strategy – essentially an 18-year time horizon when starting at birth – allows for weathering market fluctuations that might devastate a fund started when a child is already in high school.
“We see many parents who think they’ve missed the boat if they didn’t start at birth,” says Tomas Ferreira, an education savings specialist with National Bank. “But the reality is that starting at any point is better than not starting at all. The government grants remain available until the year a child turns 17, and even five years of contributions can make a meaningful difference.”
For parents feeling overwhelmed by the prospect of finding room in their budget for RESP contributions, financial advisors suggest several approaches. Redirecting a portion of the Canada Child Benefit directly to an RESP creates a contribution strategy that feels less burdensome on monthly cashflow. Another approach involves requesting RESP contributions from grandparents and extended family in lieu of holiday or birthday gifts.
Some families have found success with the “one percent rule” – starting by contributing just one percent of household income toward education savings, then increasing by another percentage point annually until reaching the optimal contribution level. This gradual approach prevents the sticker shock that often accompanies new financial commitments.
The psychological benefits of early RESP participation extend beyond dollars and cents. Children who grow up knowing their education fund is steadily growing often develop stronger academic focus and ambition. Several studies suggest that the simple existence of dedicated education savings increases the likelihood that a student will pursue post-secondary education – regardless of the amount saved.
As tuition costs continue rising faster than inflation, the gap between prepared and unprepared families will likely widen. The 2023 Canadian University Survey Consortium report found that students without family financial support were three times more likely to abandon their studies before completion compared to peers with established education funds.
For a country that prides itself on educational opportunity, these statistics should prompt serious reflection. The $100,000 difference between early and late RESP adoption represents more than just money – it’s about creating generational advancement opportunities without the burden of crushing debt.
Whether your child is six months or six years old, the message from financial experts remains consistent: the best time to start an RESP was the day they were born. The second-best time is today.
