RESP Only For the Rich ?

in Canada Learning Bond, Registered Education Savings Plan

TL: DR: Rich folk use RESPs much more than the poor, counter to whom it was supposed to help.

Estimated reading time: 3 minutes

Stats Canada came out with a very telling survey titled, Why are Lower-income Parents Less Likely to Open an RESP Account? by Aneta Bonikowska and Marc Frenette. The findings are worrisome in that it points to the fact that the RESP seems to be a program used mainly by the wealthy(er) parents.

A telling quote from the Executive summary.

The results suggest that differences in wealth remain the single most important factor behind the gap in RESP participation by family income, even after accounting for differences in parental education and literacy, numeracy and financial literacy.

Why are Lower-income Parents Less Likely to Open an RESP Account? The Roles of Literacy, Education and Wealth

Many lower-income families are unaware that it can grow with the Canada Learning Bond even if they put no money into the program. The CLB can add up to almost $2000 (over the life of the RESP).

They claim that this is a Financial Literacy issue is a bit of a stretch, but possible. I think it is that Lower Income families are not aware of the CLB and other benefits (which I suppose is Financial Literacy). My guess is tellers at banks will not offer to set up an RESP for a “No Star” customer. The Up-Sell would be reserved for “good” customers.

A Graphic from Stats Canada Report about RESP and Lower Income Families
A Graphic from Stats Canada Report about RESP and Lower-Income Families


I guess the question is simple if Canadian Parents are barely making ends meet, will they put money aside for their kids’ post-secondary education? This report concludes, No.

I think I agree, but I’d like to know how to change that.

Ways to Fix This?

  1. Banks need to market this program to lower income families, and point out that there is Free money to be had. The Canada Learning Bond is that free money. I really doubt many banks will do this, unless they could make money doing it.
  2. Expand the Canada Learning Bond, so that there is more money for lower income families.
  3. Maybe a Government run RESP program, that is set up for lower income families?

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  • smayer97 July 8, 2020, 8:24 PM

    Another reason it is not promoted is that the CLB seems to requires more administration for the banks or investment institutions. Last time I checked, RBC can handle the CLB but when I tried to transfer a LARGE RESP to RBC Direct Investing (DI), DI is not set up to handle the CLB so I was told I would lose that and could not even split it off to stay with the bank.

    • bigcajunman July 17, 2020, 7:51 PM

      It sounds like the RESP program needs to be revamped to make this stuff work for the people it is supposed to work for.


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