I have set up an RESP for my son. For those who don’t remember, my son is on the Autism Spectrum, so why would I not put money into this RDSP, instead of an RESP? There are a few reasons for an RESP for a disabled child.
There can be many reasons that an RESP is still a viable savings plan for parents of disabled children, and here are a few to consider.
Child Can Attend Post-Secondary Programs
If your child is not mentally disabled or can cope with a post-secondary program, then an RESP is an excellent way to plan for their post-secondary education. In our case my son may be able to go to College, University or other training programs. Having an RESP is simply a good plan for his future.
CESG Can Pay Well
As my son’s RDSP Disability Savings Bond is calculated against my family income, currently the DSB payment is quite low. When my son reaches his 18th birthday the DSB will be calculated against his income, so the pay out for money deposited into his RDSP will be higher.
While the CESG portion of the RESP is also calculated based on my family income, it still pays well. I get 20% pay back up to $2500, so $500 every year is pretty good payback for an investment.
RESP Can Be Rolled into RDSP
There is a way to transfer money from an unused RESP to an RDSP. Is this the best thing to do with the RESP if it is unused is an open question. My RDSP expert said it would be better to collapse the RESP, pay back all grants and pay tax on any growth, and then add the remaining moneys into an RDSP. I will investigate that concept some more as my son gets closer to University age.
Your Situation May Vary
Depending on the situation, what is working for me (in my opinion), may not work as well for your family. I would do the research and look at the arithmetic about whether it is worthwhile setting up both an RDSP and an RESP for your disabled child. If you can only afford 1 savings plan, make sure the RDSP is dealt with first. If your income is low, remember the Canada Learning Bond might be available to your kid’s RESP, and that pays if you put in minimal amounts.
Great write up – hard to find good advice when determining whether to save for a disabled child in a RESP or RDSP. Also, many people are quick to recommend contributing to a RDSP without realizing that the government match could likely grow threefold after the child reaches 18 if their income is low at that time.
Another factor to consider is the case of multiple children and a family RESP. In that case you can pay out earned income to any of your other children if one does not continue to post secondary education due to a disability. Grants can also be paid out other children but only to a maximum of $7200 per beneficiary.
The addition of one more sibling to a family RESP can be especially beneficial if you are trying to max out your government grants in later years as each child on the plan adds extra room for a $500 grant, $1000 if making up for past years.
Yes, putting the minimum to get grants until they are 18 is how we are going. The max for grants right now is 1000 so it is easy. Wait every year to get the Statement of Grants.
My son is the youngest, I had already fought the RESP wars for my daughters, so the Family RESP angle never came into play, for us.
This is interesting information. My stepson has ADHD and we are considering some investments for him. I had no idea thank you so much for this article.