Why Real Estate Wins Over RESPs for Funding Education—and Beyond
As education costs rise and the financial future becomes more uncertain, Canadian parents are facing tough questions. Is saving through a traditional RESP enough? Or is there a better way to not only fund education but build lasting financial security for the family?
The Registered Education Savings Plan (RESP) has long been a trusted tool, offering government grants and tax-sheltered growth to help families save. But when you dig deeper, its limitations become clear—RESPs can cover education costs but offer little else.
Real estate, on the other hand, provides a powerful alternative. It not only helps fund education but creates enduring financial opportunities for your family.
How Much Should Families Save for Education?
RESPs provide a solid foundation for saving, especially with the boost from government grants. Families contributing up to $2,500 annually ($208/mth) receive a 20% grant—an extra $500 each year, up to a lifetime maximum of $7,200 per child. This grant enhances growth, making RESPs an attractive starting point for education savings.
However, the cost of education has been rising steadily. By 2040, a four-year degree with residency is projected to cost ~$135,000. This total includes tuition and living expenses, adjusted for inflation.
Even with maximum RESP contributions over 15 years, with an 8% annual rate of return and government grants, families still face a gap of approximately $53,000. To meet this target, parents need to save more than the prescribed RESP amounts, adding approximately $164/month to their base savings of $208/month, for total contributions of $372 monthly.
RESPs are straightforward, government-supported, and low-risk, making them appealing for many families. However, they fall short when it comes to building long-term value. After graduation, the RESP funds are gone, leaving no ongoing benefits.
One alternative is to allocate the monthly RESP contributions to service a down payment loan and acquire a rental property instead, offering a way to meet education goals while delivering benefits RESPs simply can’t match.
The Case for Real Estate: More Than Just Education Savings
Real estate offers a unique advantage. Unlike RESPs, which are depleted during schooling, a rental property continues to grow, earning income and creating opportunities for your family long after your child finishes school.
Read on to learn more about how this strategy works, or view the complete guide to unlock its full potential for your family’s future.
How It Works
Appreciation and Growth
Rental properties typically appreciate over time, building equity that could grow faster than many traditional savings methods.
Residual Income
Monthly rental income helps offset costs and continues increasing with inflation, creating a self-sustaining financial asset.
Flexible Usage
Real estate equity can fund anything from education to starting a business, getting married, or buying a first home.
Beyond GraduationReal estate delivers benefits that extend far beyond what an RESP can offer:
While in School: Tenants continue paying down the mortgage, potentially covering the interest on any student loan borrowed against the property.
After Graduation: The property remains an appreciating asset, offering rental income or equity for major milestones like launching a career, starting a family, or purchasing a home.
Parent Payback: Parents can even refinance the property after tuition is covered, pulling out their original contributions while leaving the child with a valuable asset. This is a benefit no RESP can deliver.
Crunching the Numbers: Why Real Estate Stands Out
When you compare RESPs to real estate as strategies for funding education, the differences are striking. While both approaches have their merits, real estate consistently offers broader and longer-lasting benefits.
RESPs are straightforward and offer some unique advantages, like government grants that boost contributions by 20% annually (up to $500 per year, or $7,200 over a child’s lifetime). However, their use is strictly limited to education expenses. Once those funds are withdrawn to cover tuition and living costs, the RESP’s value is effectively spent. There’s no residual benefit—no asset left to appreciate or generate future income.
In contrast, real estate serves as a multi-dimensional investment. A rental property can appreciate significantly over time, often at rates that outpace traditional savings methods. This appreciation builds equity—a lasting value that families can leverage to cover education costs without selling the property.
Unlike RESPs, real estate doesn’t limit its use. The funds you access through property equity can be applied to anything: education, starting a business, buying a first home, or even helping your child get married. And while RESPs are depleted after withdrawals, real estate retains its value and keeps growing.
Then there’s the added benefit of rental income. As your property generates income, that cash flow can help offset costs or fund additional investments. Over time, as rents rise with inflation, this income stream becomes increasingly valuable—a feature no RESP can replicate.
Finally, there’s a tax advantage. RESP withdrawals are taxed as income when used for education, potentially reducing their overall value. Real estate, on the other hand, allows you to access funds through equity loans, which are not taxable. This makes real estate a more tax-efficient way to fund your family’s needs.
A Real-World Example: How Real Estate Outperforms
Let’s take the $372 monthly contribution needed to fund a $135,000 RESP education savings target and see how it could work in a real estate strategy instead. The results are striking—not only does real estate match the RESP’s education funding capabilities, but it creates significantly more value along the way.
How It StartsRather than saving $372 per month in an RESP, the same amount is used to service a down payment loan of $64,000. This provides the funds needed for a 20% down payment and closing costs on a $275,000 rental property. The property generates $2,500 in monthly rent, allowing it to cash flow sustainably from day one.
15 Years of GrowthThe property appreciates at a conservative rate of 2% annually. By year 15:
The property value grows to approximately $370,000.
With regular mortgage paydowns and surplus cash flow from the rental, significant equity builds up—enough to fund a student loan of $135,000 while leaving an additional $150,000 in equity beyond what the RESP would have provided.
When It’s Time for SchoolAt year 15, the student can refinance the property to access the same $135,000 education fund they would have had in the RESP. Here’s the key difference:
The tenant continues to pay rent, which services both the original mortgage and the new equity takeout loan used to cover tuition and living expenses.
Post-Graduation: A $200,000+ AdvantageBy the time the student graduates five years later, the property and rents have continued to appreciate. Not only have education costs been covered, but the property now holds an additional $200,000+ in value creation compared to the RESP, along with surplus cash flow from the rental.
Building a Legacy with Real Estate
RESPs are designed to fund education and nothing more. Once the funds are spent, they’re gone. Real estate, on the other hand, delivers incremental financial benefits that RESP savings simply can’t match.
By investing in a rental property, families unlock a strategy that funds education, builds long-term wealth, and creates opportunities for future generations. Real estate isn’t just about paying for school—it’s about building a legacy that lasts.
As education costs rise and the financial future becomes more uncertain, Canadian parents are facing tough questions. Is saving through a traditional RESP enough? Or is there a better way to not only fund education but build lasting financial security for the family?
The Registered Education Savings Plan (RESP) has long been a trusted tool, offering government grants and tax-sheltered growth to help families save. But when you dig deeper, its limitations become clear—RESPs can cover education costs but offer little else.
Real estate, on the other hand, provides a powerful alternative. It not only helps fund education but creates enduring financial opportunities for your family.
How Much Should Families Save for Education?
RESPs provide a solid foundation for saving, especially with the boost from government grants. Families contributing up to $2,500 annually ($208/mth) receive a 20% grant—an extra $500 each year, up to a lifetime maximum of $7,200 per child. This grant enhances growth, making RESPs an attractive starting point for education savings.
However, the cost of education has been rising steadily. By 2040, a four-year degree with residency is projected to cost ~$135,000. This total includes tuition and living expenses, adjusted for inflation.
Even with maximum RESP contributions over 15 years, with an 8% annual rate of return and government grants, families still face a gap of approximately $53,000. To meet this target, parents need to save more than the prescribed RESP amounts, adding approximately $164/month to their base savings of $208/month, for total contributions of $372 monthly.
RESPs are straightforward, government-supported, and low-risk, making them appealing for many families. However, they fall short when it comes to building long-term value. After graduation, the RESP funds are gone, leaving no ongoing benefits.
One alternative is to allocate the monthly RESP contributions to service a down payment loan and acquire a rental property instead, offering a way to meet education goals while delivering benefits RESPs simply can’t match.
The Case for Real Estate: More Than Just Education Savings
Real estate offers a unique advantage. Unlike RESPs, which are depleted during schooling, a rental property continues to grow, earning income and creating opportunities for your family long after your child finishes school.
Read on to learn more about how this strategy works, or view the complete guide to unlock its full potential for your family’s future.
How It Works
Beyond GraduationReal estate delivers benefits that extend far beyond what an RESP can offer:
Crunching the Numbers: Why Real Estate Stands Out
When you compare RESPs to real estate as strategies for funding education, the differences are striking. While both approaches have their merits, real estate consistently offers broader and longer-lasting benefits.
RESPs are straightforward and offer some unique advantages, like government grants that boost contributions by 20% annually (up to $500 per year, or $7,200 over a child’s lifetime). However, their use is strictly limited to education expenses. Once those funds are withdrawn to cover tuition and living costs, the RESP’s value is effectively spent. There’s no residual benefit—no asset left to appreciate or generate future income.
In contrast, real estate serves as a multi-dimensional investment. A rental property can appreciate significantly over time, often at rates that outpace traditional savings methods. This appreciation builds equity—a lasting value that families can leverage to cover education costs without selling the property.
Unlike RESPs, real estate doesn’t limit its use. The funds you access through property equity can be applied to anything: education, starting a business, buying a first home, or even helping your child get married. And while RESPs are depleted after withdrawals, real estate retains its value and keeps growing.
Then there’s the added benefit of rental income. As your property generates income, that cash flow can help offset costs or fund additional investments. Over time, as rents rise with inflation, this income stream becomes increasingly valuable—a feature no RESP can replicate.
Finally, there’s a tax advantage. RESP withdrawals are taxed as income when used for education, potentially reducing their overall value. Real estate, on the other hand, allows you to access funds through equity loans, which are not taxable. This makes real estate a more tax-efficient way to fund your family’s needs.
A Real-World Example: How Real Estate Outperforms
Let’s take the $372 monthly contribution needed to fund a $135,000 RESP education savings target and see how it could work in a real estate strategy instead. The results are striking—not only does real estate match the RESP’s education funding capabilities, but it creates significantly more value along the way.
How It StartsRather than saving $372 per month in an RESP, the same amount is used to service a down payment loan of $64,000. This provides the funds needed for a 20% down payment and closing costs on a $275,000 rental property. The property generates $2,500 in monthly rent, allowing it to cash flow sustainably from day one.
15 Years of GrowthThe property appreciates at a conservative rate of 2% annually. By year 15:
When It’s Time for SchoolAt year 15, the student can refinance the property to access the same $135,000 education fund they would have had in the RESP. Here’s the key difference:
Post-Graduation: A $200,000+ AdvantageBy the time the student graduates five years later, the property and rents have continued to appreciate. Not only have education costs been covered, but the property now holds an additional $200,000+ in value creation compared to the RESP, along with surplus cash flow from the rental.
Building a Legacy with Real Estate
RESPs are designed to fund education and nothing more. Once the funds are spent, they’re gone. Real estate, on the other hand, delivers incremental financial benefits that RESP savings simply can’t match.
Curious about how real estate can outperform traditional savings methods? Click here to check out the step-by-step Rental vs RESP strategy in our comprehensive guide.
By investing in a rental property, families unlock a strategy that funds education, builds long-term wealth, and creates opportunities for future generations. Real estate isn’t just about paying for school—it’s about building a legacy that lasts.
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