I remember the day my neighbor, Tom, showed me his newborn daughter’s university fund—a simple envelope with $100 and a hastily scribbled note: “Sarah’s future.” His intentions were golden, but his approach needed work.
For Canadian parents and grandparents, saving for a child’s education has become as essential as hockey practice and winter tires. With university tuition averaging $7,400 annually—and that’s before textbooks, housing, or the occasional emergency pizza fund—starting early isn’t just smart; it’s necessary.
“The challenge isn’t convincing families they should save for education,” explains Lesley-Anne Scorgie, personal finance educator and founder of MeVest. “It’s helping them navigate the maze of options without leaving money on the table.”
The education savings landscape has evolved dramatically since the days when a summer job could cover a year’s tuition. Today’s parents face a complex ecosystem of registered plans, grants, and investment strategies. The good news? The government wants to help—if you know where to look.
RESPs: The Foundation of Education Savings
The Registered Education Savings Plan (RESP) remains the cornerstone of education funding strategies for good reason. When parents contribute to an RESP, the federal government adds the Canada Education Savings Grant (CESG)—essentially free money that matches 20% of annual contributions up to $500 per year, with a lifetime limit of $7,200 per beneficiary.
“An RESP is like finding a 20% off coupon for your child’s future,” says Jamie Golombek, managing director of tax and estate planning at CIBC Wealth Advisory Services. “No other education savings vehicle offers that immediate, guaranteed return.”
For families with modest incomes, the government sweetens the deal further with the Canada Learning Bond, providing up to $2,000 without requiring any personal contributions—yet only about a third of eligible children receive it due to awareness gaps.
What many parents don’t realize is the flexibility of these accounts. RESPs can remain open for 36 years, and if your child decides against post-secondary education, you have options: transfer the funds to siblings, roll the growth into your RRSP (subject to available contribution room), or withdraw the accumulated earnings (paying tax plus a 20% penalty).
Beyond the RESP: Complementary Strategies
While RESPs shine as the primary education funding vehicle, savvy parents are increasingly building complementary approaches.
“Think of education saving like cooking a good meal—you need more than one ingredient,” advises Scorgie. “An RESP might be your protein, but you need side dishes too.”
Tax-Free Savings Accounts (TFSAs) offer a flexible complement. Unlike RESPs, TFSA withdrawals have no strings attached and can cover expenses that RESPs don’t, such as a car for commuting to school or startup costs for a first apartment.
Some families are exploring less conventional routes. Graeme and Sofia Chen of Vancouver structured their mortgage to maintain a readvanceable home equity line of credit specifically for education expenses. “We’re essentially leveraging our home equity to invest in our kids’ human capital,” Graeme explains. “The interest might be tax-deductible if we structure it properly, though this approach isn’t for everyone.”
Investment Strategies: Age-Appropriate Approaches
The how matters as much as the where when it comes to education savings. A newborn and a high school sophomore require dramatically different investment approaches.
Jason Heath, managing director at Objective Financial Partners, suggests a sliding scale approach: “For young children, you can afford to be aggressive with growth-oriented investments. As they enter high school, that’s when you start shifting to capital preservation.”
This strategy reflects the timeline’s impact on risk tolerance. With a 15-year horizon, market volatility becomes less concerning. For children approaching college age, however, a market correction could be devastating to short-term funding plans.
Today’s parents are increasingly using all-in-one ETF portfolios that automatically rebalance based on time horizons. “The set-it-and-forget-it approach works well for busy parents,” notes Heath. “Something like a target date fund that grows more conservative as your child approaches college age can remove the emotion from investing.”
The data supports this approach. According to a Bank of Montreal education savings study, parents who established a regular automatic contribution plan accumulated 30% more in education savings than those making occasional lump-sum contributions, even when the total amounts were similar.
Common Pitfalls and Misconceptions
Despite the clear benefits, Canadians leave millions in potential education grants unclaimed each year. The patterns reveal several persistent misconceptions.
“The biggest mistake I see is paralysis by analysis,” says Scorgie. “Parents wait for the ‘perfect moment’ to start an RESP, missing years of potential growth and grants.”
Other common missteps include:
- Focusing exclusively on RESPs without considering overall family financial health. Establishing emergency savings and paying down high-interest debt should come first.
- Grandparents opening separate RESPs without coordinating with parents, potentially complicating grant maximization strategies.
- Overcontributing past the $50,000 lifetime limit per beneficiary, which doesn’t attract additional grants and can create tax complications.
- Failing to name a successor subscriber on RESP accounts, which can create administrative headaches if the original account holder passes away.
The Real Cost of Waiting
The mathematics of delay are sobering. A family starting an RESP when their child is born, contributing $2,500 annually to maximize grants, would accumulate approximately $87,000 by age 18 (assuming a 5% return). Waiting just five years reduces that total to about $55,000—a difference that represents nearly two full years of university education.
“Time is quite literally money when it comes to education savings,” explains Golombek. “Every year of delay means sacrificing both compound growth and government grants that never come back.”
Adapting to Educational Evolution
The education landscape itself continues to evolve, creating new considerations for today’s savers. Remote learning options, micro-credentials, and non-traditional education paths mean children might access funds differently than previous generations.
“We’re preparing for education opportunities that might not even exist yet,” notes Maya Richardson, whose daughters are 7 and 9. “I’m saving in both RESPs and TFSAs to give them maximum flexibility, whether they want a traditional degree, coding bootcamp, or international experience.”
This flexibility mindset represents a shift from previous generations, who often saved with a four-year university degree as the assumed destination.
Starting Today: Practical First Steps
For parents who haven’t started yet, financial advisors recommend a simple approach:
- Open an RESP account with a financial institution that offers flexibility and reasonable fees.
- Set up automatic contributions, even if small, to build the savings habit.
- Apply for the Canada Learning Bond if eligible.
- Communicate your education savings plan to family members who might want to contribute as gifts.
- Revisit your strategy annually as your family’s financial situation evolves.
The most important step remains the first one. As Tom, my neighbor, eventually learned after consulting a financial advisor, even modest beginnings can grow into meaningful education funds—but only if you start.
His daughter’s university fund has graduated from that envelope to a proper RESP with monthly contributions. Sarah is now five, and her education fund contains nearly $20,000—a significant improvement from that original $100, and a testament to the power of starting somewhere, even if imperfectly.
