September 04, 2020
Effective Use of an RESP
It’s that time of year where our minds shift to thinking about school and the need to plan for and effectively use a child’s RESP. With the financial fallout from the coronavirus pandemic, it has left some families looking for ways to effectively use RESP funds. A question we’re often asked is what an RESP contribution can be used for? Below, we’ve put together a list of some helpful information to outline current costs and qualifying expenses that may be expected through their post-secondary tenure.
According to Statistics Canada, the average cost for a Canadian citizen studying in Canada for the 2019-20 school year was $6,463 for undergraduate students and $7,056 for graduate students. Living expenses vary depending on the location of the school, but it’s typically $10,000 to $15,000 annually for rent, transportation, food and other expenses for the year.
Fortunately, Revenue Canada permits a relatively extensive list of reasonable expenses that RESP funds can cover. RESP Education Assistance Payments (EAP) can be used to pay for any education-related costs once you’ve provided proof of enrollment in a qualifying program.
Typically a plan sponsor won’t ask you to specify how the money will be used or to submit receipts, but keeping them in case of an inquiry is likely a sound course of action. Here’s a brief list of some eligible expenses over and above tuition that can be included:
- A vehicle to get to classes along with the insurance, gas, parking and maintenance
- Housing costs and other living expenses such as meals, including meal plans
- A laptop or tablet, desk, athletic and student activity fees
- Any purchase that serves to further the student’s studies qualifies
We know that 2020 has come with its share of financial pressures. The need to find ways to continue to contribute and use contributing wisely becomes top-of-mind. The Allan Bush Investment Team, is steadfast in its course of action when it comes to planning for your family’s financial future. Investing in dividend-paying stocks or fixed income to create steady cash flow may be appropriate. Think of the analogy of buying chickens and benefiting from the eggs they lay . This can be an appropriate way to think about how to pay for your offspring’s post-secondary learning as the additional income may help.
If you’d like to chat further about how we can work together to look after your child’s RESP, please don’t hesitate to reach out.