I really enjoy getting questions from readers, whether via the comment section or email. Due to the vast number of questions, unfortunately, sometimes I don’t have sufficient time to provide detailed answers. For that, I do apologize!
One of the common questions I get from readers is something like this: “My partner and I are on our own financial independence journey. But how do I plan for my kids at the same time without derailing our FI plans?”
As our kids get older, this is a question that Mrs. T and I have been thinking more and more about. I have always been on the side that we shouldn’t sacrifice our financial future for the kids, because they can find ways to generate income during post-secondary education (i.e. scholarship, bursaries, part-time work, etc) and eventually full-time income when they enter the work force. But are there things we can do as parents to help our kids’ financial future?
When our kids were born, we knew we wanted to take advantage of the power of compounding. So we opened their RESPs right away (individual RESPs) and started contributing $2,500 each year to get the annual maximum of the Canadian Education Savings Grant (CESG). We felt pretty good about this approach until a few years ago, when we came to a major realization, which I’ll get into later.
Just as there are multiple layers when it comes to financial independence retire early, planning for our kids’ financial future is also a multi-layered challenge. It’s not as easy as simply contributing to RESP each year.
Thanks to readers’ comments and questions, I thought it would be worthwhile to walk through ideas we’re thinking about, including the RESP catch-up strategy, CESG optimization, the reality of Metro Vancouver housing costs, and how we are trying to balance everything while still staying on track with our FIRE plans and goals.
The RESP: A quick refresher (and parts that many people miss)
For those readers who are new to this blog, new to Canadian personal finance, or perhaps new parents, the Registered Educational Savings Plan is an excellent financial tool available to Canadian parents.
I have written a detailed RESP previously if you want to check it out.
Some key points:
- The lifetime RESP contribution limit is $50,000 per child.
- The government contributes 20% on the first $2,500 per year through the Canada Education Savings Grant (CESG), for a maximum grant of $500 per year.
- The lifetime CESG limit is $7,200 per child.
- Contributions grow tax-sheltered inside the RESP. The original money (up to the maximum of $50,000) you contributed to the RESP can be withdrawn tax-free for qualified education expenses
- The CESG and the growth portions are taxed upon withdrawal.
- Withdrawals for qualified education expenses are taxed in the student’s hands, not the subscriber’s. Since students typically have low incomes, this typically results in little or no tax at all.
The CESG is a very good deal You’re essentially getting a 20% guaranteed return on the annual $2,500 contribution. Then the CESG amount can grow tax-deferred in the RESP.
Definitely do not say no to free money!
A part that many parents miss, and we definitely missed this when our kids were born, is the $14,000 portion that does not get CESG ($50,000 lifetime RESP max minus $36,000 in CESG eligible contributions). In theory, you can “front load” the RESP when you open the RESP. This means you’d contribute $2,500 to get the 20% CESG from the Canadian government, then contribute another $14,000. By contributing a lump sum early, you can really get the money to work harder and longer for you and allow it to compound over time.
But the problem that many young parents face, us included, is that they don’t have a “free” $14,000 lying around available to invest. So we have taken the traditional route of contributing $2,500 per year. We didn’t really get into this front loading RESP until last year (I guess it’d be called mid loading).
Note: I actually didn’t realize the additional $14,000 RESP room until I had a call with a Wealthsimple advisor. Kudos to the advisor for pointing this out.
Do I regret this a little bit? A little bit! If I knew better, I would have considered front-loading a larger amount early and contributing more money toward kids’ RESPs rather than our investment portfolio. One positive thing out of this is that at least we were investing with the money instead of spending it…
Our RESP catch-up strategy
Because we didn’t front load, we have been playing a bit of catch-up since late 2024. Here’s what we have done.
In late 2024, in addition to the regular $2,500 annual contribution per child, we contributed extra money to reduce the additional $14,000 room. In December 2024, we contributed $1,250 to each RESP, then in January 2025, we contributed another $1,500. We contributed more money throughout 2025.
Where did the extra money come from? Basically, instead of contributing the money to our investment portfolio, we used that money for the RESPs. I’m proud and happy to announce that we have completed maxing out the $14,000 room for both kids.
Again, the reason for doing this is to take advantage of compounding. Time in the market matters. A dollar contributed today has more time to compound than a dollar we contribute when our kids are 15. Don’t forget that the money in the RESP grows tax-deferred so it makes sense to contribute to it as quickly as possible after receiving the annual CESG.
It’s important to remember that only the first $2,500 per year gets the CESG matching. Extra contributions above this threshold don’t get any grants. Now, some people may consider just contributing $50,000 to an RESP right away and forgo the $7,000 CESG. Generally speaking, I don’t believe this is a sound strategy, but it could work out if there was a significant market downturn the year you contribute the $50,000. However, that is not a reality, as very few people have $50,000 available.
Anyway, for most people, I think the following is the RESP order of priority:
- First, contribute $2,500 per year to capture the $500 CESG. Do this every year.
- If you missed previous years, catch up on CESG by contributing an extra $2,500 (up to a maximum of $1,000 in CESG is allowed through catch-up)
- Once you max out on the annual allowed CESG, contribute more money to reduce the additional $14,000 contribution room to take advantage of compounding.
I truly believe the RESP is an excellent tool for parents to save money for their children’s post-secondary education.
What do we invest in our RESPs?
Because of the relatively short timeline, and wanting to keep RESP simple, we didn’t deploy the dividend growth strategy or pick individual stocks. Instead, we utilize index ETFs.
When Kid 1.0 was born, we used the Canadian Couch Potato portfolio approach by investing in four different index ETFs. Because two of the funds were in USD, buying and rebalancing was a bit complicated. When Kid 2.0 was born, the Canadian Couch Potato portfolio used all CAD index ETFs, so it was easier to buy and rebalance.
When we learned more about all-in-one ETFs, we were hooked on the simplicity and decided to re-construct both RESPs by holding XEQT (100% equity). We picked XEQT because it’s 100% in equity and its exposure to the global market. We picked XEQT over VEQT because at the time XEQT has a higher exposure to the US market.
With the 10+ year investment timeline, it made sense for us to invest in 100% equity. Some people shift their RESPs toward more bonds as their children get closer to 18 but we haven’t done that yet. We may do that later but for now, we plan to stay with 100% XEQT.
On the other hand, the family RESPs we set up to get the $1,200 BC Training & Education Savings Grant (BCTESG). By mistake, I purchased XGRO (80% equity, 20% bonds). Because TD Direct Investing has a hefty commission, we decided to keep XGRO rather than switching to XEQT.
Would I continue to go with an all equity index ETF like XEQT if we were to start out with an RESP?
Absolutely! I really believe these all-in-one ETFs are the cheapest and simplest way to invest.
When to stop contributing to an RESP
When should you stop contributing to an RESP? The obvious answer is to make sure you max out the $50,000 contribution room and capture the full $7,200 CESG at the same time. A few key things to keep in mind:
- CESG is available until the end of the calendar year the child turns 17
- RESP must be collapsed by the end of the 35th year after opening
So if you contribute $2,500 each year to get the $500 CESG, then contribute additional money every year to max out the additional $14,000 room, you should “stop” contributing to the RESP by the 15th year after opening (you’d contribute $2,500 from year 1 to year 14 to get the $500 CESG, then $1,000 in year 15 to get the remaining $200 CESG).
For a few years, we received additional CESG due to meeting the income threshold. This means we have already maxed out Kid 1.0’s RESP this year, and we can max out Kid 2.0’s RESP in four years.
The ugly housing market in Metro Vancouver
Once we get beyond saving and maxing out for the RESP and the funding for post-secondary education, we need to deal with the 800-pound gorilla problem – Metro Vancouver’s crazy housing market.
It’s not a surprise that housing is expensive in Metro Vancouver (I suppose it’s true for many major Canadian cities, too). As of February 2026, the average home price in Metro Vancouver is $1.2M, with the detached home average price of $2.12M. So when I think about how our kids are going to afford a property in Vancouver when they enter the workforce, it’s looking quite scary.
I have no idea what the Metro Vancouver housing market will be like in the future. But I know one thing, it’s unlikely to go down or stay flat. For simplicity’s sake, let’s assume that in 15 years, the average housing price increases by 25%, which would be $1.5M to get a property (I’m just picked a 25% increase at random). At 20% down, that’s a down payment of $300,000. Whichever way you put it, that’s A LOT of money for a young adult who is just starting their career.
That begs the question… what do we do? Do we try to help out when it comes to kids’ housing? If so, how do we help?
To be honest, we don’t really know because we don’t have all the answers yet. And the housing market can definitely change when our kids start considering getting into the real estate market.
Here are some options that we have considered:
Option 1: Help our kids with their down payments.
This is an easy option. (and probably the most common – ‘the bank of Mom and Dad). We would gift them a lump sum when they want to buy a property. We may fund the full down payment or a large portion of it. The real challenge is to make sure we have the money set aside and/or readily accessible. We certainly don’t want to have to sell stocks to fund the down payments. We also don’t want to jeopardize our retirement income to fund the down payments.
Option 2: Build a non-registered investment account for kids
Another option is to have a dedicated non-registered account for the kids, invest money regularly, and let things compound over time. In some way, we are already doing this with a non-registered account under Mrs. T’s name. This account is being funded by kids’ birthday money and their weekly allowance. Building a non-registered investment account for kids is a good idea in theory, but when I look at it, the actual dollar amount for this account is relatively small, because birthday gift money and weekly allowance amounts are small.
Option 3: Help out with their TFSAs
This option has to do with contributing to kids’ TFSAs when they’re eligible to open one. We can start gifting money to them to invest in their TFSAs. The money can compound inside the TFSA tax-free and can eventually be used for any purpose, including a home purchase. The only downside of a TFSA is the somewhat limited yearly contribution room.
Option 4: Help with their FHSAs (First Home Savings Account)
Similar to the TFSA option above, another option would be helping the kids by contributing to their FHSA. Since Mrs. T and I are not eligible for FHSA, I haven’t paid too much attention to this new account, so I’ll need to do some more research to understand the rules and limitations.
Based on my limited understanding, FHSA contributions are tax-deductible and withdrawals for home purchase are non-taxable. One can contribute $8,000 each year to their FHSA for a total contribution limit of $40,000. Just like the TFSA and the RRSP, the FHSA contribution room carries forward to the next year if it hasn’t all been used. If FHSA money isn’t used to buy a home, any unused amount can be transferred to an RRSP (assuming one has RRSP room), or it can be withdrawn as taxable income.
Option 5: Move to somewhere more affordable
If the Metro Vancouver housing prices stay this nutty, our kids (and Mrs. T and I perhaps) may need to consider moving to somewhere that’s more affordable, like a smaller Canadian city. The key question for this option would be whether our kids can pursue their careers in a smaller city. Who knows, maybe 100% remote work will be the norm when our kids enter the workforce.
Option 6: Not owning a place, just rent
Renting would be the alternative to owning a place. Yes, you’d be paying rent to someone, but our kids wouldn’t need to have a large sum of money tied to real estate.
At this point, Mrs. T and I don’t really know which option is the best. The reality is, the solution for housing, if kids decide to own a place, will probably be a combination of Options 1 – 4. Option 5, as mentioned, would depend on their career paths. Renting a place and never owning may be a solid option, too. We also need to consider our financial situation in early retirement, what the kids want to do with their lives, and what the housing market looks like when the time comes.
The importance of balancing kids’ future with our FI timeline
In life, you can do anything, you just can’t do everything. This is true when it comes to finances, too. You must make choices.
As we get closer to financial independence and eventually early retirement, we need to find the right balance between planning and looking out for our kids’ financial future and our own FIRE plans. Since personal finance is personal, what’s the correct balance for us may not be correct for someone else. And since life is dynamic and fluid, it’s important to realize that the “correct” balance can change over time.
So what are some things we are considering when it comes to balancing our kids’ future and our FI/FIRE timeline?
1. We ensure that CESG is maximized every single year
We have done that every single year since kids were born. As mentioned, we maxed out Kid 1.0’s RESP this year and received the full $7,200 CESG. Next up is to max out Kid 2.0’s RESP and receive the max CESG.
2. We make sure to maximize TFSAs and RRSPs every single year
We have maxed out our TFSAs and RRSPs every year. We then invest the extra money in our non-registered accounts. Once we’re not making active income, we won’t accumulate any more RRSP contribution rooms. When that time comes, it is even more important to max out our TFSA contribution room so we can continue to grow our tax-free income.
3. Teach kids about money early
Since we homeschool our kids (we did that per our kids’ request and we have been taking it year by year), we have been teaching both kids about money. Both kids get a weekly allowance ($3) and have to split the money between saving, giving, and spending. They also have a solid understanding of compounding and investing. Both kids have shown interest and curiosity about the stock market, so I need to teach them more about it. Mrs. T and I believe that we need to raise both kids so they are financially savvy.
4. Use time as our greatest ally
Compounding is really the eighth wonder of the world and it’s important to take advantage of it. We are taking advantage of compounding by investing money in RESPs and kids’ non-registered accounts. We need to encourage both kids to open a TFSA when they’re eligible so money can compound tax-free inside.
5. Be a little selfish, don’t sacrifice our own FI/FIRE timeline trying to fully fund the kids’ lives
It’s OK to be a little selfish. As parents, we want to help our kids as much as possible, but we need to make sure we don’t sacrifice our finances as a result. It’s important to keep this in mind and find the right balance.
It’s also important that our kids develop their own financial literacy and earn their own independence. They need to understand the value of money and need to learn money lessons themselves. It’s totally OK for them to struggle in life and make mistakes. After all, we learn best from struggles and mistakes.
Summary – Planning our kids’ financial future
You can’t plan everything in life, but having a plan is better than no plan at all. When it comes to planning our kids’ financial future, the takeaway is that starting early makes a huge difference. Investing in RESP and taking advantage of the $7,200 in lifetime CESG can go a long way. Use time as an ally and let your money compound and grow over time.
Do we have everything figured out by the time Kid 1.0 is off to post-secondary school? I doubt it but at least we’ll have a solid foundation and some plans. Again, having plans is better than no plan at all, and we will continue adjusting our plan and approach to kids’ financial future (and our FI/FIRE journey) as circumstances change.
Life is not static, it is dynamic and fluid, so we must be able to adapt accordingly.
What about you? I’d love to hear your plans.
