Really Useful RESP Tips

A while back I was “interviewed” for an article that was supposed to appear in the Toronto Star, and you will be happy to hear that I am turning over a new leaf when being interviewed, I actually prepared for it!

RESP Piggy Bank

RESP’s Are Savings For Your and Your Child’s Future

Previously, if during interviews it sounded like I was talking out of my hat, I was, but things are changing. What happened to the article with the Toronto Star about Registered Education Savings Plans (RESP) I have no idea, but let me give you some of my notes that I had prepared, along with some links to some of my own thoughts on the subject.

  • Remember that there is a $50K Lifetime deposit limit
  • If you only deposit $2500/year, you will be under that limit, so maybe start with a larger lump sum to give it time to grow ?
  • If you miss giving up to $2500 one year, you roll $1000 of that limit to the next year
    Canada education savings grant (CSEG) is typically 20% up to $2500 deposited (can get higher for lower-income families)
  • If one child doesn’t use the money, you can transfer it to other children under the age of 21 (without penalties), but still can be transferred to blood relatives older than 21 ( there will be penalties there).

CLB – Canada Learning Bond

  • Little or no money needs to be deposited to get this, an initial $500 gets put in even if no money is deposited. Most banks are leary to do this, but talk to SmartSaver.org and they will help set things up (in the Toronto Area)

General RESP Advice

  • Start early, get your child a SIN, and maybe start with a larger lump sum to get things going (longer it has to grow, the better for you, remember the rule of 72 ).
  • If I had a chance to do it over again, I’d use a Self-Directed non-mutual fund bound system like TD Waterhouse, Questrade, BMO, etc.,
  • Beware programs that might have penalties on the principal, yes the CESG and CLB can have penalties if the child does not go to school, but you should get the money deposited back (and pay tax on the growth)
  • Invest in a simple couch potato portfolio with Index Funds or Index ETFs, no need to be aggressive here.

Tuition Costs

  • Acadia cost about $3800/term Trent is about $3500/term, so your RESP isn’t going to be able to deal with much more than Tuition costs, there are many many more costs associated with school.
    Most schools will show estimates of how much a typical year might cost (U of Waterloo, Trent and Queens do).

Alternate views

  • A lot of folks think their kids should pay for their education, but even if you only put $50 a pay in, it might help your kids start out? It is free money from the government.

As usual you can peruse my Registered Education savings Plan web page, which has a large amount of information on the topic. If you are interested in interviewing me see the About section of this site for details on this.


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{ 6 comments }

{ 6 comments… add one }
  • CalgaryPotato June 16, 2015, 9:38 AM

    I’m not sure if I am misreading, or you are misunderstanding but as far as the limit roll: Typically you can get up to $500/year in grant but you can basically make up one years worth if you’ve fallen behind. So if you deposit $5000 you can get a $1000 grant.

    Maybe that is what you meant, but it’s not how it reads.

    Reply
    • bigcajunman June 16, 2015, 9:54 AM

      I think I meant that, but thanks for clarifying, as well.

      Reply
  • Eric Schultz June 16, 2015, 9:33 AM

    Umm, in your General Advice you say:
    – use a Self-Directed non-mutual fund bound system like TD Waterhouse, Questrade, BMO, etc.

    and then you say:
    – Invest in a simple couch potato portfolio with Index Funds or Index ETFs

    If you’re going to the the route of Index Funds what’s wrong with with a fund bound system?

    Another tip is to see what incentives your provincial government offers and make sure the institution you choose participates in those (brokerages often do not, but banks – i.e.: fund bound systems – do).

    Reply
    • bigcajunman June 16, 2015, 9:51 AM

      Typically a lot of the fund bound system (at least at TD) are that you cannot access the cheaper Index Funds (in TD case E-series) without going through cogitations and such). Sorry for the confusion.

      Reply
      • Eric Schultz June 16, 2015, 10:10 AM

        Ah, yes. That’s why I switched from TD to RBC – cheap index funds and entirely on-line but without any of the e-Series hassle.

        Reply
        • bigcajunman June 16, 2015, 10:12 AM

          OK, so that is very good to know, I thought all banks were the same. Good on RBC

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