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

We 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 . The truth is, you are already late.

Why are you behind? 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.

A welcome email is on its way. If you don't see it, please check your junk folder.

But 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.