RESP

December is Here, think End of Year

by bigcajunman on December 3, 2012

I really should have been a sportscaster, I love that kind of cheap rhyming stuff.

With the year coming to an end, you need to think about a few tax related issues like:

Quarterly tax payment if you are in that tax situation (I know a surprising number of folk who make tax payments quarterly).
The Circle of Savings in Canada
Make an RESP contributions if you can, nicer than a sweater for your kids and it will pay off nicely in the future. Check the CRA link on how much CESG you might get from the contribution as well (oh and if you have put $50K in there, you have maxed out).
Make an RDSP payment to max out your contributions if you have a disabled loved one as well (remember you can also transfer from an RESP to an RDSP, so figure out which one you should put your money into).
Make an RRSP payment, the sooner it’s in there, the sooner it starts to grow, and you escape all the broohaha and tom-foolery of RRSP season.
How about your TFSA? Have you maxed out your inputs there? Sooner it’s in there, the sooner it starts growing tax-free, do that now.

You really have no excuse to say, “I have nothing to do financially in January”, now do you? Any other end of year financial fun I am missing?

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RESP: The End Game

by bigcajunman on October 29, 2012

For my regular readers you have read along with the epic saga of the RESPs that I had opened, used, and depleted for my oldest daughter (and the journey continues for my other two daughters). At the end of this post I will include a link to many of these posts (or you could search my site for RESP as well). This drama would make Shakespeare or Homer proud, with its twists and turns, rules, forms and frustrations, however for my oldest daughter her Post Secondary Odyssey is complete (for now).

During her 4 year journey, she applied for Student Grants along the way (and actually received a few), however, the system (in Ontario) is such that you cannot receive OSAP (no not the Ontario Stereo Assistance Program) Grants without taking the Loans as well. I argued a few times with different disembodied voices on the phone (who used a tone which suggested I was either insane, a crackpot or just plain uniformed) that this was the case, if your daughter deserves a Grant she must also take the Student Loan as well. I would equate that to Homer’s Medusa in terms of dramatic silliness.

Every year after first year, each student who received a loan, receives a letter from the National Student Loans Service Centre saying, “It’s time to pay back your loans! (unless you went back to school, then you can ignore this letter)”. Each year we dutifully ignored that letter, until this year, and now the letter includes a plethora of forms on how to set up paying back your student loans.

Luckily with my daughter we actually put her loan money aside, to pay off the loan as soon as it became due, so I (or my wife more likely) dutifully started reading through the forms to figure out how to do this exact thing (i.e. make a lump sum payment to pay off the loan). This is not as easy as you think. It seems easy to do, after you have made your first “installment” (where installment is a direct withdrawal from an account you have nominated, complete with a monthly interest charge accrued in that as well).

Here is where I now stand, I am attempting to have my daughter pay off her loan, without actually paying any interest charges, however, it is not clear how to do this. There is a question into the NSLSC folks asking that exact question, and after investigating on the TD Bill Paying portion of my on-line banking NSLSC is actually there to make payments too, so I am hoping, we can simply make this lump sum payment directly onto the loan, and thus it is all over and dealt with.

Am I confident this will be the case? No, my guess is my daughter will end up paying at least 1 month in interest charges while the system answers questions or gives confusing answers that foil our attempt to not pay interest, but hope does spring eternal.

Anybody else have any luck with all of this?

Some older RESP Posts from the Past:

Canada Learning Bond and RESPs, where I think I have figured out more money, that I have never actually ever received thanks to TD not doing what I think they should.
RESP and more tree died (which they did this year too), which is last year’s installment on the entire RESP saga.
RESP Wrinkles where I first learned taking out money from an RESP wasn’t going to be as easy as the previous year.
RESP Money to get Money where I found out how much it cost to prove I just spent $2500
RESP: The Old Switcheroo where I rant about one Universities trick for getting more money out of me
RESPs and Rules taking your own money out shouldn’t be this hard, should it?
RESP: Withdrawals Redux then I learned that call centers and local branches do not talk nor really acknowledge each other’s existance
RESP: This Round Finally Ends (Prologue) I actually try to start taking money out of the RESP
RESP: Lessons Learned it’s important to write down what you have learned so you remember it for the next time.

There are others simply search for RESP on my search block and you will see them.

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So that is what $50,000 looks like…

by bigcajunman on June 14, 2012

For those wondering where I might have been yesterday, I took a day off to attend my daughter’s graduation ceremony at WLU in Kitchener. I haven’t actually taken a planned day off for a long time (my Dad’s death last year was the last “break” I took from writing).

As a proud Dad I was happy to see my daughter succeed and reach her goal, but as she was handed her diploma this thought came to mind:

So that is what $50,000 looks like? {but then after a moment I had a further thought} Best investment I’ve ever made.

Indeed, it is hard to get your head around paying that much money and at the end of it your child has a piece of paper and no real guarantee of employment, however, as a parent the sense of pride silences the nasty inner financial demons that keep asking, “… was that really a good use of your money?“. Whether my child gets a job, or whether their degree helps them is a risk I (as a parent) am willing to take (hell I have invested in much riskier things and been paid back much less).

I have made a career complaining (aka Blogging) about University Costs, and I will continue to rant about the cost of Post Secondary Educations in Canada (the costs are outrageous at times), however, I am still willing to pay for it as an investment in my child’s future. If you can’t invest in your child’s future with money, help out in other ways, it is a good use of your time and resources.

Good luck, Bonne Chance and cheers to all the Graduating Students!

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CO-OP Degrees a Parent Financial Savior

by bigcajunman on April 11, 2012

An excellent comment on yesterday’s post about RESP’s Only Covering 1/2 University Costs, pointed out I did miss an important concept that parents and students should be thinking about if there is going to be money issues around going to University (or other post-secondary instiutions) and that is a Co-operative Education program could bridge the monetary gap for many students.

I should have known better, given I graduated with a CO-OP degree from the University of Waterloo, and I know many other grads, who paid their way through school thanks to that same CO-OP program, so bad on me for forgetting my own academic roots.

The folks I know who paid their way through school, usually needed a little help in their first year and then after that they were (effectively) self-sustaining (and did not need loans or help from their parents to pay for their education).

When I was in co-op there weren’t that many schools with co-operative education programs (Waterloo and Sherbrooke) , however, more and more are now putting in place co-operative programs and if a family is concerned about the price of a University education, this should be an area that they examine very closely.

My experiences in CO-OP were astoundingly good, but I was lucky that I was in a program that had lots of jobs (computer science) and I got to work in companies that were near the leading edge for technologies (as well). I still use some of the skills I learned on my co-op work terms, so if you ask my opinion, I think a co-operative education is well worthwhile, but I am not sure how well the system works now.

The problem now is over-saturation of co-operative programs and an under-saturation of folks willing to hire (especially in that past few years). Hopefully that situation will remedy itself, but we shall see.

A co-operative education is an interesting Fourth option to Student Loans, RESPs and The Bank of Mom and Dad, keep this one in mind (and keep making those useful comments too, I love it when a comment spins out another post).

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RESP: You Realize it is only going to cover tuition, right?

by bigcajunman on April 10, 2012

I had a discussion with a writer on Monday about my experiences with the entire RESP system, and I had an epiphany , which is that if I look at the current costs that I know of, and the maximum amount that you can put into an RESP, this will really only (barely) cover the cost of tuition at your child’s university (at this moment in time).

If you are putting 2,500 dollars in every year of your child’s life from birth, and getting the CESG kick in of $500 per annum, you will have about $43,000 dollars (assuming no growth in your investments (but also assuming no losses either)), assuming your child goes to University at around age 17/18, and you religiously put money in every single year.

I have pointed out previously that tuition for some schools is running about $4-5,000 a term (4 months) thus about $10K a year or $40,000 for a complete undergraduate degree (assuming only 4 years to complete).

This means if you invest wisely and get a little growth, you should be just fine, because you’ll have tuition paid for and even have a little extra for books and such. So this is good news, isn’t it?

No, because here are a few of the flaws with the model I just gave you:

Where your child lives at University can double the amount of money you need for their education.
The tuition fees at Universities have been growing at a rate higher (in some cases MUCH higher) than inflation (check out this Stats Can Overview on Tuition to get a taste).
Extra fees included on top of tuition, those grow at an even higher rate than tuition rates.

So with all of this growing at a greater rate than inflation, and the RESP allowances not really following suit, will your current RESP even pay for 1/3 of your child’s education in 18 years? I don’t know, but you better start thinking about that now, when you could put some extra money away, just in case.

The other option you have, is let your kids worry about it when they get older.

Any readers care to disagree with the math I will gladly discuss this one.

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