Invest in Your Child's Future: RESP vs. Permanent Life Insurance

Building a Foundation Before You Build the House

Just like construction, a child's financial future needs a solid foundation before anything else gets built on top of it. Two of the most common tools for that foundation are the Registered Education Savings Plan (RESP) and permanent life insurance — and each has a distinct role to play.

Option A: The RESP

An RESP can be part of every family's financial plan. The government contributes 20% of your contributions, up to $500 per year — meaning a $2,500 contribution becomes $3,000 invested, a 20% return before the money is even invested.

• Government contributions are capped at $7,200 per child, up until age 18
• You can contribute up to $50,000 per child over 35 years
• When your child attends a qualifying post-secondary program, withdrawals are taxed in their hands — typically at little to no tax, since students usually have low income
• If your child doesn't attend a qualifying institution, government grants and investment growth must be returned; your original contributions are returned tax-free, but growth is taxed as income

Option B: Permanent Life Insurance

A cash-value life insurance policy also builds a tax-deferred investment component — without a government grant, but also without the $50,000 lifetime contribution cap or restrictions on how the funds can be used.

The funds inside a policy like this can help your child:

• Start a business
• Make a down payment on a first home
• Travel
• Buy a first car
• Pay for any type of education, not just a qualifying program

Just as important: your child becomes insured regardless of their future health, occupation, or hobbies — a benefit that's easy to overlook until it's no longer available.

Comparing the Two

Contributing $2,500 a year for 17 years from birth, assuming a 5% annual return with no additional contributions:

• An RESP with $42,500 in total contributions could be worth roughly $86,000 by the time your child starts school (including the $7,200 government grant) — typically the strongest option specifically for tuition and eligible education expenses
• A participating whole life policy with the same $42,500 in contributions could show a cash value of roughly $44,000 by age 18, growing to nearly $100,000 by age 35 — accessible for any purpose, alongside a death benefit that continues growing each year

The Two Aren't Mutually Exclusive

For many families, the strongest plan uses both: an RESP to maximize the education-specific government grant, and a permanent life insurance policy to build a flexible asset with no restrictions and lifelong insurability for your child.

If you'd like to see how this could work for your family, that's a conversation worth having.