College savings: Does the government care how you spend a college savings plan in Canada?
More than a year ago, I asked about registered educational savings plans
. Now I'm wondering how the (Canadian) government regulates how you spend them.
I understand when my child(ren) can withdraw the funds and that they have to be registered in a post-secondary program. But, aside from that, how does the government check to see what you spent the money on?
I see that there's a $42,000 contribution limit over your child's lifetime. Let's say this grows to $78k. Tuition in, say, 2023, is $12k per year and my child needs a total of $50k to cover four years while living at home. My child also works at some internships and part-time jobs that cover, say, $24k of expenses. After they kick that in, there's around $50k left in the RESP. Heck, let's say there's even $25k left.
Do you have to spend this money on room and board? What's to stop someone from using this to save for a downpayment on a condo that they help their child upon graduation? Or for a car to help them get to school? Or for some other purpose? (I recognize the money is taxed in the child's hands upon withdrawal, but let's assume the child hangs on to the withdrawn money.)
And, if your child only does a one-semester program, can they pull all the money out at once? The government's RESP
page is pretty vague.