RDSP vs DRIP | My Opinion

When our eldest son was born in 2011, my father generously transferred one share of BMO into our son’s name and we began his first DRIP. A few years later our son qualified for the disability tax credit here in Canada. However, I decided not to start a Registered Disability Savings Plan (RDSP) and instead continue with his DRIP.

It’s not that the RDSP is a bad program. There are just a few hangups I do not wish to deal with. For starters, after a few years you need to re-qualify for the disability tax credit and if you fail to re-qualify it can cause a (excuse my language) shit-storm in the RDSP. Unlike other registered accounts like an RRSP and TFSA, the RDSP is not self-directed. There are few funds to choose from and the management expense ratios tend to be high. As well, in our case we had therapy and other medical expenses that needed to be covered in the short term. It should be noted, the RDSP cannot be used immediately, but is meant to be a long term savings vehicle once your child no longer qualifies for any “under age 21” programs.

The DRIP we started when our son was born was the right fit for us. There were no annual fees since it was managed through a transfer agency (Computershare) and since all the dividends were reinvested I didn’t really care about receiving the added government top-ups. A big plus was that the money could be used at any moment. The DRIP had already grown to a sizeable amount by the time we used a portion of it to pay for therapy.

One aspect I do not see talked about very much, is that some DRIPS are a good savings vehicle for those earning lower incomes. We were able to invest small sums of money into our son’s DRIP. Sometimes, just $10 or $20 dollars at a time and other times nothing at all. We weren’t hit with large inactivity fees or required to invest a substantially high minimum. The small amounts we invested was enough to get the ball rolling.

The flexibility of a DRIP was the winning feature for me. Should our son ever gain enough skills to start a business or go on to post-secondary education, the DRIP is there. It can replace an Registered Education Savings Plan (RESP), a small business loan or the dividends can act a supplement to his income.

DRIP vs RDSP, in the end the DRIP was the right choice for us.

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