Garry Marr: Here’s why using your TFSA to fund a child’s education could make sense

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Photo by Seb Ra/Getty ImagesWe independently select everything we recommend. Buying through us may earn us a commission, which supports our work.If your child is starting high school next month, you may think you have time to start planning financially for their post-secondary education. 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Because you’re now playing catch up when it comes to accessing the $7,200 in lifetime matching Canada Education Savings Grant money for registered education savings plan (RESP) contributions.The government agreed in 1998 to match 20 per cent of every dollar put into an RESP plan through the CESG: contribute $2,500 per year, and you can get $500 that goes into the tax-sheltered vehicle for education savings.Get the latest headlines, breaking news and columns.By signing up you consent to receive the above newsletter from Postmedia Network Inc.A welcome email is on its way. If you don't see it, please check your junk folder.The next issue of Top Stories will soon be in your inbox.We encountered an issue signing you up. Please try againBut you can only catch up on one missed annual limit at a time, meaning the maximum you can collect in a year is $1,000 in grant money based on a $5,000 contribution. Four years of high school isn’t enough time to collect the maximum grant per child.“You’ve got up until the end of the year when the child turns 17 (to contribute), but around the age of 10, you start to run out of ramp,” said Peter Lewis, the president and chief executive of CST Savings Inc., a group RESP company that has been around for about 60 years. “Don’t forget the power of compounding; the earlier you get the money in, the longer it has to grow.’You have to wonder how much Canadians are missing out on free money because of a lack of knowledge.The general idea behind the RESP is that when you do eventually take the taxable money out, it will be in the hands of a full-time student who will be at a low enough marginal rate to pay little or no tax.A survey Lewis’ group recently did found 80 per cent of Canadians are familiar with tax-free savings accounts, but only two-thirds know about RESPs.The same poll found that 45 per cent of parents surveyed, including those with children over 18, wished they had started saving earlier. Only half of the parents in the survey have even opened an RESP.The online survey conducted by Earnscliffe on behalf of CST was done from July 2 to 13, 2026, with a sample of 1,500 respondents living in Canada aged 18 or older. A poll of that size is considered accurate to within 2.53 percentage points, 19 times out of 20.The Canada Learning Bond, which can contribute up to $2,000 for low-income households with incomes under around $60,000, was not directly part of the survey. But the federal government’s most recent survey found that just 44 per cent of eligible children are participating.It’s a remarkably low rate, considering it’s free and requires no contribution. You get $500 for just opening the account and $100 per year per child until they are 15. The money goes into an RESP.“It’s better than it was a decade ago. But to only have 44 per cent receive it, that feels like an awareness issue,” said Lewis, noting that CST has found once an RESP is opened to receive the bond, low-income parents tend to start putting their own money in, too. “They just find a way,” he said.This advertisement has not loaded yet.This advertisement has not loaded yet, but your article continues below.Some parents might not feel confident about their kids’ educational path, but the RESP offers a fair bit of flexibility on how the money is used, including courses that could help your child’s job prospects.If your child doesn’t use the money from the RESP, there are exit ramps. You can withdraw contributions at any time without tax, but you must repay the grants. The bigger problem is taking out the growth, which counts as income and carries a 20 per cent penalty.The reality is many Canadians will need money from other sources, such as a tax free savings account (TFSA), to fund a child’s post-secondary education. The average Canadian undergraduate student paid $7,734 in 2025-26, according to Statistics Canada.Throw in housing costs and everything else that goes with education, and it’s not hard to understand why the average Bachelor’s student is graduating with $30,600 in debt. And that data, the latest available from StatCan, is five years old.Both Lewis and Peter Wouters, a principal at financial advisory firm PlainTalk Consulting Inc., suggest a reasonable strategy is to use your TFSA to make a $2,500 annual contribution to get the full grant — if you’re going to be dipping into your TFSA anyway, you might as well ensure you are getting the grant money.The TFSA came into effect in 2009, so some families, especially those that didn’t have kids until later in life, likely have significant balances in their accounts they can access, with the average balance $38,566 in 2024, according to the Canada Revenue Agency.“It could be worth it. You look at the average age of a first-time mother,” said Wouters, who agrees many clients have balances they can access. Take the money out (of your TFSA) tax-free, and you can always replenish it later down the road.”He also points out anyone can contribute to an RESP, not just the subscriber (usually the parent). “Friends, or relatives or anyone can dump money in as long as the subscriber agrees,” said Wouters.The only real problem is if your child doesn’t use that money, and the 20 per cent penalty you pay on the growth, on top of the fact that it counts as income if you collapse the plan without using it.“But if you take that growth and roll it into an RRSP, you avoid that penalty, but you have to have the room,” said Wouters. “It’s your only savings grace.”The other solution is a family RESP, which allows any of your children to use the money if one decides to not continue with studies.The bottom line for Wouters is free money: “Why would you kiss goodbye that 20 per cent?”We apologize, but this video has failed to load.Notice for the Postmedia NetworkThis website uses cookies to personalize your content (including ads), and allows us to analyze our traffic. 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