How Flexible Is Child Plan Vs RESP?
By Harpreet Puri
CEO & Founder
- 11 min read
- April 15th, 2025
SUMMARY
Compare the flexibility of Child Plans and Registered Education Savings Plans (RESPs) in Canada. Explore how each plan works, their pros and cons, tax treatment, usage rules, and long-term benefits. It explains why some parents prefer government-backed RESPs, while others choose the broader financial freedom of Child Plans. Know how combining both can offer a balanced strategy for a child’s future.
Introduction
Every week, we meet anxious parents at Canadian LIC who are torn between choosing a Child Plan or a Registered Education Savings Plan (RESP). These parents want to secure their child’s future, but the choice isn’t always simple. We had a young couple from Brampton in our office recently who asked a common question: “What gives us more control — a Child Plan or an RESP”?
They’d spent hours searching online for insights about Registered Education Savings Plans but were bewildered by terms such as government grants, contribution limits, tax shelters, and investment flexibility. Another Scarborough client was concerned with what would happen in the situation if their child didn’t choose to enroll in post-secondary. Would they be able to use that money for something else? That’s where the flexibility of these plans becomes an issue.
Is an RESP more flexible than a Child Plan, or is it the other way around? If so, rest assured you are not alone. And that’s precisely what we are going to dissect step-by-step in this blog.
Understanding the Registered Education Savings Plan (RESP) Canada Offers
RESP is a household name in Canada. Originally intended to be used as a government-sanctioned savings vehicle, it aids families in accumulating money to pay for their child’s post-secondary education.
Imagine that a parent opens an RESP when their kid is born. They each contribute $2,500 a year and receive 20% of the total, up to a maximum of $500 per year, in the Canada Education Savings Grant (CESG), which will mean a lifetime of $7200 per child.
But if this plan is attractive, it comes with strings attached. This is one of the biggest concerns we hear:
“What if my child doesn’t attend university? Are we going to lose the government grants?
Yes, that’s a possibility. Qualifying educational programs must be used with the funding, or the CESG must be refunded to the government. Parents can take out the amount they put in (i.e., the principal contribution amount), but investment gains and grants will be limited and taxable.
This is always where we begin the conversation when families ask us about the pros and cons of a registered education savings plan.
Pros of RESP:
- Government grants and bonds (free money!)
- Tax-deferred growth
- Wide variety of investment choices
- Easy access to Registered Education Savings Plan Quotes Online
Cons of RESP:
- Funds must be used for education
- Government grants must be returned if the child does not qualify
- Annual and lifetime contribution caps
- Withdrawals are taxable in the hands of the student
For some parents, these limitations feel too restrictive. That’s when the conversation shifts toward Child Plans.
Exploring the Flexibility of a Child Plan: What Parents Really Want
Child Plans — also known as participating whole life policies or investment-linked insurance for kids — cover more ground than just paying for school. We find parents who really wish to build wealth for the long haul for their child, not just pay for university, often opt for this plan.
“My daughter might go to college, or she might start a business,” a father from Mississauga recently wrote to us. “I want her to have the financial freedom to do either.”
This is precisely where Child Plans come into play. Unlike an RESP, a Child Plan doesn’t limit how the funds can be used. The cash value inside the policy accumulates over time and can be tapped later — for education, a business, home ownership, or even retirement.
The scheme also offers the child lifetime insurance coverage and, upon maturity, possible investment growth via dividends, again depending on the insurer.
Comparing Flexibility: RESP vs. Child Plan
1. Use of Funds
RESP:
Limited to qualifying post-secondary education. If not used for education, the CESG must be returned, and earnings are taxable.
Child Plan:
No restrictions on the expenditure of the funds. It can fund any life goal — education, travel, a startup, or purchasing a home.
One of our clients, a single mother in Vaughan, shed tears of relief when I explained that her son could use the Child Plan as a down payment on a house should he decide against attending college. “I just want him to have options,” she said. That’s the essence of flexibility.
2. Government Support vs. Personal Control
RESP:
You get free money through government grants — a significant benefit. However, you must follow government rules, and any deviation affects your returns.
Child Plan:
You fund the plan yourself. You don’t have grants; it’s totally yours, and you’re not limited to specific criteria.
We’ve noticed that the preferences of parents in differing financial circumstances vary among options. Middle-income families favour RESP for grants, while high earners tend to select Child Plans for wealth preservation and tax-efficient growth.
Long-Term Growth Potential
That’s because when families are looking for Registered Education Savings Plan Quotes Online, that means they want short- to medium-term growth — typically until their child is 18 to 25. It’s all about education.
Child Plans compound its growth for decades, even if the child requires it at a later stage of life. That creates generational wealth, which is a tremendous incentive for a lot of our clients.
We had a Markham family with a set of twins. They chose Child Plans for both children, adding, “They’ll have a financial cushion, whether they go to college or not.” By the time the kids are age 30, those policies could be worth six figures — a gift that keeps on giving.
Tax Implications
Growth is tax-deferred. When money is withdrawn for education, the student pays tax — often minimal due to low income.
Child Plan:
Growth inside the policy is tax-deferred. Withdrawals via policy loans or dividends can often be accessed tax-free, depending on how it’s structured.
This tax efficiency makes the Child Plan appealing to business owners and professionals who want to minimize future tax burdens.
Contribution, Flexibility, and Limits
RESP:
$50,000 total lifetime contribution limit per beneficiary. In order to receive maximum CESG, annual contributions should be consistent. Missing contributions can mean lost grant opportunities.
Child Plan:
No legal limits on how much you can give. You can make contributions annually, monthly or in a lump sum.
We had a Toronto-based client who inherited a decent amount of money and wanted to use it for his granddaughter. He found the RESP cap frustrating and was appreciative of the Child Plan that we presented. He added, “I want her to be taken care of, whatever she decides to do.”
Ownership and Control
Here is where a lot of parents have that “a-ha” moment. In the case of an RESP, the parent or grandparent opens the account, but when the child becomes eligible for education and withdraws the funds, they take control. The student is able to access the money — even if the parent disapproves of how it is being spent, as long as it falls within the scope of qualifying education.
One client from Richmond Hill came back frustrated. “My son used the funds for a program I didn’t expect, and we had no say.” These stories are not rare.
Child Plan:
Ownership stays with the person who purchases the policy. You decide when and how to transfer control to the child. Parents often structure this to hand it over when the child turns 25, 30, or even later.
This structure empowers the family to guide their children’s financial decisions with maturity, not just availability.
Impact on Student Loans and Financial Aid
This factor surprises many parents.
RESPs, as they’re designated for education, can affect eligibility for student aid and grants. Financial institutions and schools often factor in RESP assets when assessing a student’s financial need.
However, Child Plans are insurance policies. Their cash values are excluded from student loan and grant calculations. This can provide an advantage to students applying to provincial aid programs or to students applying for bursaries.
One of our clients, whose daughter was accepted into an Ontario university. Her RESP was sizable, so she didn’t qualify for additional grants. By contrast, their second child — who had saved in a Child Plan — was entitled to additional assistance.
Risk and Guarantees
RESPs typically involve investment in mutual funds, ETFs, or GICs. That means growth is tied to the market. A family from Etobicoke who set up their RESP in 2019 told us that the COVID crash in 2020 wiped out a large chunk of their education savings right before their son was about to start school.
Markets can recover, but there isn’t much time to do so on short timelines.
As Child Plans are insurance-oriented, they are more stable. Participating in whole-life policies provides guaranteed cash values and death benefits. And when combined with dividend-paying insurers, they provide consistent annual growth even in down markets.
Combining Both: A Powerful Strategy
Here’s a suggestion that we frequently recommend to our clients: Why not do both?
For those families who are financially able to do so, the RESP for the government grant benefits and Child Plan for the long-term flexibility is a plan that makes sense. This way, you won’t lose out on CESG money, but you are still investing in an asset that your child can use outside school.
This was the way a couple from Oakville structured their plan. Every year, they maxed out RESP contributions, but they combined that with a $200/month Child Plan. “Now we got education and future life goals out of the way,” the father said with a smile.
This hybrid option appeals to working professionals and dual-income families who want to future-proof their child’s options.
Accessibility: Ease of Opening and Managing
You can find RESP providers at banks, credit unions, and financial institutions. Setup is easy and fast with tools such as registered education savings plan quotes online. However, continued management involves working within contribution limits and tracking down eligible expenses.
Child Plans, which involve more upfront planning, are generally operated through insurance advisors or brokers. They must be customized to your family’s longer-term goals, but once established, they require little behind-the-scenes effort. Amidst so much noise, many of our clients love that these plans compound quietly in the background.
Legacy Value: Thinking Beyond Education
A Child Plan is not limited to your child’s university degree only. It can encompass future financial events — marriage, a house, starting a business, or augmenting retirement income through policy loans.
We’ve helped grandparents who established Child Plans for every grandchild to cover educational costs, but also as part of a more significant legacy plan. They considered it a way to give the gift of financial independence.
As one grandfather from Hamilton put it best: “I want to leave them more than just memories.”
Which Option Is More Flexible?
Here’s the bottom line when we compare RESP vs. Child Plan in terms of flexibility:
For parents who want the government grants and are confident their child will pursue post-secondary education, RESP is a practical tool.
For parents who value flexibility, wealth building, and legacy — especially in uncertain times — the Child Plan offers broader benefits.
Final Thoughts: Aligning with What Matters to You
Every time clients come to Canadian LIC asking, “Which is better — Child Plan or RESP?” it always starts with a question: “What do you want this money to do for your child?”
If you want assistance with financing college, a RESP is a great option. If you want to create enduring financial value that your child has to put towards any sort of future, then the Child Plan is a no-brainer.
The reality is that neither plan is a one-size-fits-all. Both have their place. But the difference is how much flexibility they allow — and how closely they align with your long-term vision for your family.
If you’re like so many of the families we meet, you want to give your children every possible chance to grow and thrive in their own way. Once you understand not only the Registered Education Savings Plan Pros and Cons but also how Child Plans work, you can make educated decisions rather than confused ones.
Families in Canada today don’t just sit around and think about tuition anymore. They’re dreaming of freedom, independence, and financial resilience. That’s why flexibility is the most important ingredient of any savings plan, more so than the interest it earns.
More on Registered Education Savings Plan
FAQs
Some of the main advantages are tax-deferred growth and access to government grants such as the Canada Education Savings Grant (CESG). These features help maximize your savings for your child’s future education. However, one of the biggest cons is the inflexibility of the funds — they must be used exclusively for qualifying education. Constantly repay the grants and pay taxes on earnings if your child doesn’t attend post-secondary school.
Yes, lots of financial institutions and insurance brokers will provide Registered Education Savings Plan Quotes Online. Plan to contribute to an RESP account. These quotes can help you compare RESP providers, different ways to contribute to the account, and growth possibilities (depending on your investment). Quotes can change depending on your goals as well as how long you intend to contribute; however, it’s significant to understand this.
A Child Plan, on the other hand, builds cash value over time and without restrictions on how the money is used in the future. Unlike a Registered Education Savings Plan in Canada, where withdrawals can only be used for education, Child Plans allow your child to use the money for anything at all — from starting a business to a home purchase. Such flexibility makes it a popular option for parents who are planning for more than just education.
The government grants in the RESP must be paid back if your child does not attend a qualifying post-secondary institution. You can still pull your original contributions out tax-free, but anything earned will be taxed and perhaps penalized unless it’s transferred to your RRSP. That’s why the pros and cons of RESP need to be fully understood before relying solely on one.
A lot of Canadian parents resort to a blend of the two. The RESP is a great way to grow education savings by contributing to government grants; a child plan provides long-term, flexible financial growth. Combining the best of both worlds, reviewing quotes for a Registered Education Savings Plan online, and consulting a trusted advisor allows you to put together a strategy that will give your school-age child the best start in life and the best future.
Key Takeaways
- RESPs are education-specific and offer government grants, but come with restrictions on fund usage, contribution limits, and potential tax implications if the child doesn’t pursue post-secondary education.
- Child Plans provide long-term flexibility and can be used for any future need—education, buying a home, starting a business, or even retirement—with no restrictions on how or when the funds are used.
- RESPs grow based on market performance and require careful timing to avoid losses before withdrawal. In contrast, Child Plans offer guaranteed growth, lifelong insurance coverage, and potential dividend earnings.
- Registered education savings plan pros and cons must be considered based on your family’s goals. If government support is your priority, RESP is valuable. If you want control and versatility, Child Plans stand out.
- Many Canadian parents choose to combine both plans, using the RESP for short-term education support and the Child Plan for long-term financial security.
- Registered education savings plan quotes online make it easy to compare RESP options, but professional advice helps ensure you’re aligning with your child’s full life potential—not just their college fund.
- Registered education savings plan Canada rules are strict, while Child Plans allow parents to retain control and customize the plan based on their child’s readiness and life path.
Sources and Further Reading
- Government of Canada – Registered Education Savings Plans (RESPs)
Official information about RESP rules, CESG, contribution limits, and tax benefits.
🔗 https://www.canada.ca/en/services/benefits/education/education-savings/resp.html - Canada Revenue Agency (CRA) – RESP Tax Considerations
Details on RESP taxation, contribution tracking, and withdrawal guidelines.
🔗 https://www.canada.ca/en/revenue-agency/services/tax/individuals/topics/registered-education-savings-plans-resps.html - Financial Consumer Agency of Canada – Education Savings Tools
A comprehensive guide on how RESPs work, government grants, and planning tools.
🔗 https://www.canada.ca/en/services/finance/educationfunding.html - The Canadian Life and Health Insurance Association (CLHIA)
Reliable resource for understanding life insurance products in Canada, including participating in whole life insurance for children.
🔗 https://www.clhia.ca - Canadian Securities Administrators (CSA) – Education on Registered Plans
Offers independent information about registered plans like RESPs and other investment accounts.
🔗 https://www.securities-administrators.ca
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IN THIS ARTICLE
- How Flexible Is Child Plan Vs RESP?
- Understanding the Registered Education Savings Plan (RESP) Canada Offers
- Exploring the Flexibility of a Child Plan: What Parents Really Want
- Comparing Flexibility: RESP vs. Child Plan
- Long-Term Growth Potential
- Tax Implications
- Contribution, Flexibility, and Limits
- Ownership and Control
- Impact on Student Loans and Financial Aid
- Risk and Guarantees
- Combining Both: A Powerful Strategy
- Accessibility: Ease of Opening and Managing
- Legacy Value: Thinking Beyond Education
- Which Option Is More Flexible?
- Final Thoughts: Aligning with What Matters to You