Family RESP vs Individual RESP: Which One is Better?

Siblings already share a lot of things- toys, clothes, parental attention…  Should they share a RESP in a family RESP too?  This post will go over some of the pros and cons of a Family RESP.

We finally got around to it after going through our financial checklist as new parents again, and recently opened up another RESP for our daughter (the new Baby GYM).  We had all the paper work ready, including her birth certificate, her social insurance number, and our government issued ID’s to apply for another RESP account.  Our bank representative recommended that we change the RESP we had for toddler GYM to a family RESP and add her name as one of the beneficiaries.

Family RESP vs Individual RESP

That way, if one of them decides not to go to school or has different pricing for schooling, then it will be easier to manage since they would both share the RESP.  This post will explain whether a family RESP vs individual RESP will be better for your family.

Related: What is an RESP grant?

What is a Family RESP?

A family RESP is where the subscriber (for example, you, the parents) can name more than one beneficiary to the RESP plan.

According to Canada.com:

Family plans are the only RESP that allow subscribers to name more than one beneficiary. Each beneficiary must be connected by blood relationship or adoption to each living subscriber or have been so tied to a deceased original subscriber.

A beneficiary under a family plan entered into after 1998, must be less than 21 years of age at the time he or she is named as a beneficiary. When one family plan is transferred to another, a beneficiary who is 21 years of age or older can still be named a beneficiary to the new RESP.

A Family RESP plan is NOT to be confused with a pooled RESP plan or a group RESP plan (also known as group scholarship trusts), which are heavily marketed and according to Boomer and Echo should be avoided.

A group RESP should be avoided because there are high fees if you need to change or collapse the account, and many parents have reported that the balance of their RESP is very low.

Basically many people feel that group RESPs are a scam.  I always avert my eye contact when I see eager, smiling young 18 year olds at the mall trying to sell Heritage Education Fund RESPs anyways when I pass by (do you?).

Pros and Cons of a Family RESP

Our bank representative recommended using a Family RESP because it is more simple to set up.  The pros of the Family RESP is that you would save on investment fees.  It is more straightforward when you set one up because it is less paperwork for your financial institution to do.  As mentioned, another positive is that it allows for flexibility come RESP withdrawal time.

If one child decides not to go to post secondary education (*Gasp* the nerve of your child) or one child goes to a school that costs much more than the other child (Ivy league education in the US, anyone?), then you have flexibility when it comes to your RESP withdrawal.

The downside of the family RESP is during the contribution stage of the RESP.

When you contribute to the family RESP (once there is more than one beneficiary), it will automatically split your contribution for the year into two, or 50% (if you have two beneficiaries on the plan).

Each time you contribute to your RESP, you will have to call in to your bank (or institution with your RESP account) and specify what amount of the dollars you are contributing goes to which individual in the family RESP account.

This sounds very annoying to have to do (especially in this first year of the family RESP, since we already contributed to toddler GYM’s RESP), but it is just difficult in the first year, I suppose and is important to do.

After you’re done having kids and adding to your Family RESP it becomes straight forward.

If you neglect this step, it can be an RESP contribution nightmare and big hassle.  You will end up having differing amounts of contribution in your children’s RESP accounts that you didn’t intend to have.

Moneysense’s Bruce Sellery also recommends a family RESP.

Pros and Cons of an Individual RESP

Now that we’ve talked about family RESPs and benefits and drawbacks, here are the pros and cons of an individual RESP.

With an individual RESP, you might think that if one decides to go to a post secondary school that costs more or one child decides not to go to post secondary school, then it would be difficult to transfer money from one sibling to another.  No, it’s not difficult but it does require a transfer and is only allowed (without tax implications) between siblings.

Also, the most important thing to note is that when you transfer your RESP to the other sibling, it has to be done before age 21 unless the receiving RESP plan is a family RESP plan.

When should you sign up for an individual RESP?  Obviously if you are planning to have only one child then an individual RESP makes sense.

A little bit more in the grey zone:  If you have a child and aren’t planning to have another child for a few years later, like a larger age gap between siblings (I would say 4 years and up), then an individual RESP will make sense too.  This is because it might be difficult to be contributing and at the same time withdrawing from the RESP, to keep track of it all.

Another pro for the individual RESP is if you are an aunt or an uncle, or cousin, you can open an RESP account for an individual.  With a Family RESP account, the beneficiaries have to be related to you by blood or adoption.

You cannot open up a Family RESP plan for your niece or nephew.

One more pro about the individual RESP is that there is no age limit.  For the family plan, the beneficiary has to be named into the plan before they turn 21.

Related: Justwealth vs Wealthsimple RESP

To Share or Not to Share the RESP

As mentioned, siblings share a lot already.  Whether your family opts for the individual or the family RESP is a personal one, and there are definitely benefits and drawbacks to both.  It also depends on whether you plan to have more than one child, and how spaced apart your children are in age.

Personally I would have preferred to have individual plans (I like to have separate accounts and keep track of things separately- what’s wrong with me??).  My husband prefers to keep it simple and just have a family account because it’s family.

But to be honest, I don’t mind having a family RESP plan- it provides a bit more of a cushion or buffer to what the future might hold.  It allows some flexibility for our children and what they might decide to do for their post-secondary education.

Here’s a handy PDF from the government of Canada outlining the differences between the Family RESP vs Individual RESP plan.

Parents, do you have a family or an individual RESP? 

How are the differences between the family RESP vs individual RESP come RESP withdrawal time?

You may also be interested in:

Get the Young Money Bootcamp PDF FREE

Free Dividend Yield Spreadsheet Tracker Download and Blog Updates

19 thoughts on “Family RESP vs Individual RESP: Which One is Better?”

  1. Hey Gym! Deciding on family plan or individual plan isn’t easy. When we set up our RESPs, our banker at that time wasn’t very good at explaining what the difference was. In the end, we have 2 kids with family plans and 2 kids with individual plans. Even though we have two family plans, each kid has their own account. That way I can easily make investing decisions that are appropriate for each child. With the eldest in university in the draw-down phase, and the youngest only 10 years old, their investment mixes are very different.

    Reply
    • @Kari- Interesting that you have two and two! Which RESP provider do you use for your children that allow for individual accounts? Our kids are two years apart so investing decisions probably won’t be too different since they will be both gearing up to go to post secondary around the same time. Ours is in one brokerage RESP family account.

      Reply
  2. We signed up for the family one as well.

    I’ve never been told I need to split amounts, but noticed that whenever money is deposited into the account, it automatically gets split 50% to each kid. Not sure what happens when I invest in something though (currently it’s just sitting in cash, as we just opened it)….

    When I decide to invest say $1000 in an ETF – will it be 2x$500 into the same fund, or 1 full $1000 investment?

    Only difference is it may limit amount of drips if it’s split..hah

    Reply
    • @Moneymaaster- It would be 1 full $1000 investment when you invest since it’s a family account. Yeah, it gets split 50% automatically. Normally that’s not an issue except when you are contributing the first time in the first year (since we contributed to our son’s already and our daughter was born later in the year) and I guess when you are withdrawing.

      Reply
  3. Thanks for the great breakdown between both types of RESPs. With the 529 account here in the US they don’t have a family plan per se but any unused funds can transferred to another family member like a sibling, in-law or even a spouse so their is some flexibility in the college savings account over here.
    We have already opened a 529 for BwC about right after we received his social security card and trying to plan out how much we’re going to contribute on there. Both of our parents have already chipped in like they did they TwC’s 529 so he’s off to good start in his college fund.

    Reply
    • @Kris- Great job, you guys got on that 529 account very quickly! Hope you are sleeping through the night (because I am not stilllllll).

      Reply
  4. When we had our little one we went with a family RESP because of the flexibility we think it provides. We have plans of having another little one so it made sense to us.

    I think I could have researched it more because I didn’t know about the splitting 50/50 upon contribution. This wouldn’t have changed our decision but it is good to know for the next little one.

    We opened a self directed account through Questrade and manage it all ourselves. For now anyway.

    Reply
    • @Maria- That’s great that you knew about the family RESP right away! You could wait to contribute for the next one so that the contribution is the same for both of them when you have your second one- but I guess that depends on your strategy with the CESG grants. Great that you used Questrade for the RESP 🙂

      Reply
  5. In the article, you state that the Family RESP is transferable to siblings if one does not attend post-secondary school. Is the CESG portion of the RESP also included in your definition of what is transferable? Is that an advantage for a Family RESP over an individual RESP? I got conflicting information from what I understand on CRA’s website and other professionals.

    Reply
    • @Philippe Ryan- No it does not include the CESG portion ($7200) of the RESP as that can’t be transferred but the rest of it (tax sheltered RESP can be used between siblings).

      Reply
  6. Is there a difference in how much leftover money can be transferred to RRSP between family account and individual accounts. With 3 kids and 3 individual RESP accounts, will each account allow for up to 50K transfer totalling 150K. Whereas one family account will allow one 50K. Is this correct?

    Reply
    • @Vu- Do you mean how much money can be transferred to “RESP” rather than “RRSP” between family and individual accounts? if it is Family RESP for 3 kids it’s $150K with individual RESP for 3 kids it’s still $150K maximum contribution.

      Reply
  7. We opened a family resp (as convinced by rbc) we have a 6 yo 2 yo and 1 month old.
    Does the government only match a max per child per year? Ie if I contribute $2500 per year per child and for arguments sake government contributes 10% $250. If I have 3 kids as beneficiaries will they contribute $750 ($250 per beneficiary) or is it a $250 Max

    Reply
    • @Jed- Congrats on the new addition to your family 🙂 It is the latter. It is 20% CESG, so if you contributed $2500 it is $500. If you have three kids and you contributed $7500 you would get $1500 in the family RESP. It is 20% of what you contribute up to the maximum per child you can contribute to get your CESG- $7500 per year maximum.

      Reply

Leave a Comment

This site uses Akismet to reduce spam. Learn how your comment data is processed.