Are women getting the right advice about RESPs?

Knowing firsthand what emotional and financial student debt can be, I was determined to give my children a better post-secondary experience and a solid foundation for their adult lives.

A little over a month after our daughter was born, my husband and I headed to the bank with the baby wrapped around my body and wrapped in a cloth. We opened a RESP together, established regular contributions from our joint bank account, and felt good about the investment we were making in our child’s future.

Years later, we have two teenage children and a family RESP with a healthy balance, but I regret it—and I can’t access those funds. Here’s why, and everything you need to know before setting up your child’s RESP.

RESP 101

If you are considering opening a RESP for your child (or children), there are a few important things you should know. The terms used are different and can be confusing, so let’s break them down:

• Subscriber: The person (or persons) who open the RESP, make financial contributions and determine the type of investment within the account, as well as the level of risk tolerance. Registrants are usually the child’s parents, but other older family members can open RESPs.
• Primary Caregiver: A person receiving the Canada Child Benefit (CCB) is also considered primarily responsible for the care and education of the child. This is usually the mother and the default as such, although you can enter documents to amend this.
• Beneficiary: The child (or children) will eventually receive funds from the RESP if all legal requirements, such as proof of enrollment in an eligible post-secondary institution, are met.
• Promoter: The financial institution involved (your bank, credit union, or investment company).

If this seems complicated, that’s because it is. “They use all this talk,” says Liz Schieck, an educator and certified financial planner (CFP) at The New School of Finance in Toronto.

Schieck notes that in order to open a RESP for a child, you must have the child’s social insurance number (SIN). If multiple RESPs are opened for one child, the name of the primary guardian remains the same for all accounts. This is because the Canada Education Savings Grant (CESG) is linked to the primary caregiver rather than the enrollee, and there is a lifetime limit on grant contributions per minor when multiple accounts are opened.

Translation: If you open a RESP for your child and a generous grandparent and uncle, the maximum grant amount is unchanged rather than tripled.

The dangers of misinformation (or bad advice)

When my husband and I set up our children’s RESP, we were blissfully unaware of how many options we had. After politely declining to work with the RESP company that contacted us days after our daughter was born, we made an appointment with our bank, a large financial institution that already held our savings and RRSPs.

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We asked questions at the appointment, listened to the advice we were given, and opened an account with my husband listed as the subscriber and me listed as the primary caregiver. It wasn’t until later that I realized how different those roles were and what I could agree with as a sleep-deprived new mom.

During the appointment with our bank, we were told that one parent would take on the role of registrant (a name that was new to us) and the other would be listed as the primary carer. When we asked if we could both be added to the subscriber list, we were told no. The primary caregiver role fell to me—a parent who receives Canada Child Benefit because of its mother-centered policy—and my husband was earning a lot of money at the time, so it seemed logical that he would fill the role of enrollee. Because the money was being invested for our children and my name was on the account as their primary guardian, I still felt that we jointly held the RESP—an assumption that seems silly in retrospect.

As the primary custodian in my children’s RESP, I do not have control or access to the funds in the account. I cannot check our children’s RESP balance or make contributions. I have no say in how the money is invested, when it is withdrawn, and how it will ultimately be distributed.

Fortunately, I’m still happily married to my husband—but if that were to change, he would have control of the $100k of investments we’ve built together.

“When you do RESP with your partner, you don’t really explore the power difference between the two roles,” says Schieck, who has seen situations like mine before. “But both partners should have the ability to make decisions about that account, including income and investment types.”

Schieck explains that although the Government of Canada says that a RESP can be held jointly by two subscribers, not all financial institutions offer this setup. When I contacted my financial institution for clarification earlier this month, they responded that you can open a single-subscriber RESP at any of their bank branches across Canada, but you can only open joint-subscriber RESPs through their direct investment and securities advisors. The latter option was not presented to me at the branch level, nor was it discussed when I asked the bank questions about RESP last year.

This is a problem, says Schieck. “When choosing a financial institution for your children’s RESP, I would recommend asking if they allow joint enrollees before you open an account.”

How to protect yourself while investing in your children’s future

There is no official explanation as to why some institutions only offer single-enrollment RESPs, or only offer co-managed RESPs through certain channels, but we can make some assumptions.