Whenever I’ve tried to figure out how much someone should contribute to an RESP for their child – I’ve always gotten stuck on the issue of whether the kid lives at home during his school years or goes to school out of town. My rough calculations indicate that if you contribute the maximum allowed each year for an RESP then you will probably have enough money if the child goes to school out of town (roughly speaking).
But what if you save all this money and they decide to live at home? In that case the total cost gets cut about 40-50% since they don’t have to pay for accomodation and food. You can’t really plan for this since most students don’t know where they will be going to school for sure until less than a year before graduating high school.
I’ve always thought that you would just have to get the child to spend more money (drive a new car?) while in school to use up the funds. Alternatively, you could save some money in an RESP and some in an open account which would cover both situations. In fact, the answer is to just withdraw any contributions that you made to the RESP. They can be withdrawn by the account owner (ie Mom & Dad) once the child starts school with no penalty of any kind. You wouldn’t have to withdraw all the contributions – just whatever you feel is the right amount. If the kid is starting her 4th year and there is still $50k in the RESP then that would be a good time to figure out how much the contributions were.
Make sure the student is getting non-contributions
If you run into a similar situation then make sure the financial institution you are dealing with is withdrawing non-contribution money when sending money to the student. Similarily if you withdraw contributions for yourself – clarify with the financial institution that this is indeed happening. You can just call the company that holds your RESP to find out what the total contributions are.