Monday, March 3, 2008

resp as part of net worth

Since I have recently opened a Registered Education Savings Plan (RESP) for our son, a conundrum has occurred to me;

Do I include the RESP balance as part of our Net Worth?

Points To Include Our RESP Balance As Part of Our Net Worth
  • The funds are technically ours (we have complete control over them)
  • If our son does not attend school, the money becomes ours if we choose
  • I hate to see money leave our net worth that has technically been saved, and not really spent on anything, (well anything yet....)
  • If our son does not attend school, it may become our money and will appear onto our net worth one day. If we failed to include it until this point this would look like a windfall. This will throw off my tracking and performance reviews.

Points To Not Include Our RESP Balance As Part of Our Net Worth

  • The funds are theoretically someone else's money (our son's)
  • When our son attends school, which he is very likely to do, the money goes away
  • I would hate to add money to our net worth over the next 20 years that will likely not be ours
  • If our son attends school, it becomes his money and if included, will drop from our net worth one day. This will throw off my tracking and performance reviews.
  • The CESG's (Canadian Government Grant's) sole beneficiary is our son.

What do you think?


Luc-Rock said...

I don't think the RESP should be included in your personal net worth, since this will most likely be your son's money.

However, you could always create a separate "Family Net Worth" report and add your RESP in that report.

Dividends4Life said...

I don't include my kids' college funds when I calculate my net worth. One difference though is that my plan under U.S. law is irrevocable - it is theirs at age 18. Even if it wasn't I would not include it.

Best Wishes,

Scott said...

Don't include the RESP in your net worth calculation. The intention of the savings plan is to fund your childs education and as such it is his asset. If the funds eventually are rolled into your own RSP's due to them not being used for education it should be considered a windfall because that's really what it is. It was never part of your intended asset base.

Sarlock said...

I've included my 2 year-old daughter's RESP in my personal net worth calculation. I, too, grappled with the question as you are as to whether to include this amount or not.

In the end I came to a realization that whether I had an RESP or not, I would be funding a significant portion of my daughter's post-secondary education and this would be part of my annual expenses during those years (the two greatest financial gifts I can give her are helping with her education and helping her get in to the real estate market at an early age). The fact that I am putting away money now toward this future expense just means that I am allowing myself 18 years to spread this expense out instead of having to incur it at the time which would have a much heavier impact on my savings when those days arrive.

Yes, the money is technically *hers*, but until she spends it, it is my money that I have put in to a tax-favorable growth account for her to use so that I don't have to fund her education from yearly cash flows when the day arrives.

Thus, I have included it in my personal net worth computations - with a caveat. I have only included the amount that I have put in to her account, not the amount the governments have contributed nor any amount of growth (or lack of, as has been happening recently).

pitz said...

RESP is an asset that, in bankruptcy, is the property of *your* estate. So its yours, if the creditors come a'calling (a situation that hopefully will never happen...).

Middle Class Millionaire said...


I agree with pitz that technically it should probably be included in your networth. However, other than to satisfy the technical definition of networth I don’t think there is really any benefit of including it. When using networth to gauge your progress you’ll probably subtract it why include it?

MG said...

Thanks for the great comments. Some excellent points were brought up here. I am going to do a follow up to this post and point out some of the comments.

Anonymous said...

I agree with keeping it in your networth. I have and believe as above that i will be helping fund the education and this is just keeping future dollars in my pocket.

It is an asset after all? Do you take out your wife's RRSP because it has her name on it and is technically hers if she leaves you? Besides its money you can remove in a worst case scenerio if needed (I personally know people who've done this!)


Anonymous said...

I have also included RESP in my networth because it is my money being saved up. Also, the portion you have contributed technically is still yours and you will get it back when they go to school-its just the CESG & growth/income that taxed on their hands. Also, my kids are toddlers now so I will have the RESP for 15+ years.
Networth is an indication of how you are doing so its unfair to leave the RESP amount out.

Q- From Surrey, BC