Posted On Mar 14, 2026

When children leave home for university, many families assume the major financial planning decisions are behind them.

After all, the RESP has been funded, tuition bills are being paid, and the focus shifts to helping your child adjust to independence.

But what many families discover is that the first tax return your child files as a university student can open the door to several financial opportunities - both for them and for you as parents.

Recently, I had a conversation about this topic with my own son, who is currently in his first year of university. It highlighted several important things that many families may not fully understand.

Here are a few of the key considerations.

RESP Withdrawals Are Taxable - But Usually Not a Problem

Many families worry when they see RESP income appear on their child’s tax return.

The portion of RESP withdrawals that comes from government grants and investment growth is called an Educational Assistance Payment (EAP) and is taxable to the student, not the parent.

However, this is usually not a problem.

Most university students have relatively low income, so even if they receive RESP funds for tuition, housing, or books, their overall taxable income is often low enough that little or no tax is actually owed.

In other words, the RESP is structured so that the income is taxed in the hands of the person with the lowest tax rate - the student.

 

 

Tuition Tax Credits Are Extremely Valuable

Universities issue a tax slip (T2202) showing eligible tuition paid during the year.

These amounts generate a tuition tax credit, which can reduce taxes owed.

But here’s something many families don’t realize:Students often don’t need these credits yet because their income is low.

So the unused credits can either:

  • Be carried forward for the student to use when they begin working full-time

  • Or transferred to a parent or grandparent (up to certain limits) to reduce their tax bill today

For families paying thousands in tuition, this can be a meaningful tax planning opportunity.

 

 

Filing a Tax Return Unlocks Government Benefits

Even if your child earned very little income, filing a tax return is still important.

Why?

Because filing taxes is what determines eligibility for various government benefits and credits.

For example, students with low incomes may qualify for programs tied to the GST credit system, including the newly announced Canada Groceries and Essentials Benefit, which provides additional support to lower-income taxpayers.

Many students (and parents) miss these payments simply because they never file a return.

It’s Also a Good Time to Start Teaching Investing

Another milestone when kids start university is introducing them to basic investing.

Many parents help their children open their first investment account - often starting with a Tax-Free Savings Account (TFSA) once they turn 18.

A TFSA allows investments to grow tax-free and can be a powerful long-term wealth-building tool if started early.

Even modest savings invested during university can compound significantly over time.

 

University Is a Financial Education - For the Whole Family

When children leave home for school, it marks the beginning of a new phase financially.

Parents shift from saving for education to helping young adults build their financial foundation.

That includes:

  • Understanding taxes

  • Learning about credit and borrowing

  • Beginning to invest

  • Planning for major life milestones ahead

These early lessons can shape financial habits for decades.

Quick Recap: Financial Tips for Families with Kids Starting University

So let’s recap the simple financial steps that can help your family make the most of the opportunities available during these University/College years:

1️⃣ Plan RESP withdrawals carefully:  RESP funds are typically taxed in the student’s hands, often at very low tax rates. Coordinating withdrawals with the student’s income can help minimize taxes.

2️⃣ Decide how to use tuition tax credits:  Students may not need these credits immediately. They can often be transferred to parents or carried forward for the student to use later when their income is higher.

3️⃣ Make sure your student files a tax return every year:  Even if their income is very low, filing a return can unlock eligibility for government benefits and credits.

4️⃣ Consider opening a TFSA once your child turns 18:  A TFSA allows investments to grow tax-free and can be a great way to start building savings early.

5️⃣ Start the conversation about long-term financial goal:  University is often the first step toward financial independence. Talking about budgeting, saving, investing, and future milestones — including eventually buying a home — can help students develop strong financial habits early.

Final Thoughts

Many families focus heavily on getting their children into university — but spend far less time thinking about the financial planning opportunities that come with it.

The reality is that the university years can be a perfect time to:

  • Optimize RESP withdrawals

  • Use tuition tax credits strategically

  • Access government benefits

  • Begin long-term investing

And perhaps most importantly, it’s a chance to start teaching the next generation how to manage money wisely.

Let's connect!

If you have children in or approaching university age and want to think through the financial side of things, I’m always happy to help families plan for this next stage.

  • Call/text:  416 801-6616. Email: Domenic@BetterMortgagesByDom.ca

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Dom

 

 

 

 

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