As another school year begins, many parents naturally start thinking about their children’s future. Every September is a reminder that they’re growing up faster than we’d like, and for many families that means one thing: it’s time to start saving for post-secondary education.
But what if we’ve been asking the wrong question?
At Your Family CFO, we believe every financial decision should be tested before it’s made. Just because a savings product has “education” in its name doesn’t automatically make it the best place for your money. In fact, for many families, contributing to an RESP may not be the right first step.
Before saving for your child’s future, you need to protect your family’s present. If you’re carrying high-interest debt, don’t have an emergency fund, lack proper life or disability insurance, or haven’t started saving consistently for your own retirement, those priorities should come first. Your children can borrow for school. You can’t borrow for retirement.
RESPs absolutely have value. The government will contribute up to $7,200 per child through the Canada Education Savings Grant, and that’s a tremendous incentive. But every financial product comes with trade-offs.
RESP Advantages
- Up to $7,200 in government grants.
- Tax-deferred investment growth.
- Great option once your financial foundation is secure.
RESP Considerations
- Money is largely locked in for education.
- Less flexibility if life changes.
- Limited access during emergencies.
- No built-in protection if a parent becomes disabled or passes away.
The biggest concern, however, is one very few people ever discuss: the time value of money.
Most investments don’t produce their greatest growth in the first 20 years—they do it in the decades that follow. By using those investments for education just as compounding is beginning to accelerate, you may unknowingly sacrifice hundreds of thousands of dollars of future retirement wealth. That’s why we encourage families to compare every option, not just the RESP.
Depending on your situation, a Tax-Free Savings Account, strategic use of home equity, or even a properly structured cash-value life insurance policy may offer greater flexibility while still achieving the education goal. Sometimes allowing investments to continue growing while using low-cost student financing can leave both parents and children in a stronger financial position.
The goal isn’t simply to pay for school. The goal is to give your children opportunities without sacrificing your own financial future.
At Your Family CFO, we don’t recommend products — we build strategies. Every family is different, and your education savings plan should be too. Because the best gift you can give your children isn’t just paying for their education. It’s making sure they never have to financially support you in retirement.
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