Tag Archives: RESP

Mortgage prepayment versus RESP in Canada comparing debt reduction with education savings and CESG grants

Mortgage Prepayment vs RESP: Should You Pay Down the Mortgage or Save for Your Kids?

The previous articles in this series compared mortgage prepayment with investing inside a TFSA, an RRSP, and a non-registered investment account. The RESP creates a different decision because there are really two RESP comparisons hiding inside the same account.

The first is whether I should contribute enough to receive the available Canada Education Savings Grant or put that money against the mortgage instead. The second is what I should do after I have already captured the grant. Should another dollar go into the RESP without receiving any additional CESG, into my TFSA if I still have room, or against the mortgage?

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RESP Deep Dive: The Registered Education Savings Plan for Canadians Who Plan in Decades

Most personal finance accounts in Canada ask you to trust the government with your money and take the tax benefit on faith. The RESP is one of the few where the government just hands you cash. Contribute, and Ottawa deposits a 20% match into the account — no clawback, no means test for the basic grant, no strings beyond “the kid eventually enrols in something.” I’m generally skeptical of anything marketed as “free money.” This is the rare case where the label is accurate.

The Registered Education Savings Plan is also one of the most misunderstood accounts in the country. People over-contribute and get penalized. They front-load and quietly forfeit thousands in grants. They panic when a kid takes a gap year, or moves abroad, or decides university isn’t the plan — and they make expensive withdrawal decisions because nobody explained the three buckets of money inside the account. And for the readers of this site — incorporated, mobile, thinking about jurisdiction — there’s a whole layer that the mainstream RESP guides never touch: what happens to this account when you or your child stop being a Canadian resident.

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