RESP from Start to Spend

I supply the following scenario as a simple example to show how RESPs can work, and include some advice from my experiences using the program.

Registered Education Savings Plan (RESP)

So, now you have had a baby, and you are sure that your child will be a Doctor one day, or an Engineer, or maybe a Plumber? If you are thinking this, and you want to help them meet this goal, by helping financially, you might want to start working on saving money, and luckily (in Canada) the Government is kind enough to have set up the Registered Education Savings Plan (RESP).

What is your first step? Get your child a Social Insurance Number (the day after they are born, would be a useful time to apply, given how busy you will be in the days after that).  Get that done, right away, or you will have to start waiting, and time is your friend at the beginning of this process, but don’t procrastinate, you are wasting valuable doubling time, if you do.

Next step, go set up an RESP with whomever you feel comfortable dealing with, or whomever gives you the best deal (Shop Around, don’t just use your bank because it is convenient). Check the RESP page for my experiences, and I would recommend try to stay away from Bank Mutual Fund accounts, give yourself enough freedom to use some simple Couch Potato Portfolios to invest your funds (remembering you have a relatively short period, and shouldn’t be too risky either, as you don’t have a lot of recovery time in your investment plan).

Now we have reached the part where you make your money start working. I am assuming that currently your family income is over $87,123 and that you can invest somewhere that will give you an average of about 4% growth per year. The big assumption is that you contribute the current maximum every year to the RESP $2500. What does this look like? Funny you should ask, I have a table right here for you:

Year Principal Contribution CESG Growth Year End Total
1 $0.00 $2,500.00 $500.00 $0.00 $3,000.00
2 $3,000.00 $2,500.00 $500.00 $120.00 $6,120.00
3 $6,120.00 $2,500.00 $500.00 $244.80 $9,364.80
4 $9,364.80 $2,500.00 $500.00 $374.59 $12,739.39
5 $12,739.39 $2,500.00 $500.00 $509.58 $16,248.97
6 $16,248.97 $2,500.00 $500.00 $649.96 $19,898.93
7 $19,898.93 $2,500.00 $500.00 $795.96 $23,694.88
8 $23,694.88 $2,500.00 $500.00 $947.80 $27,642.68
9 $27,642.68 $2,500.00 $500.00 $1,105.71 $31,748.39
10 $31,748.39 $2,500.00 $500.00 $1,269.94 $36,018.32
11 $36,018.32 $2,500.00 $500.00 $1,440.73 $40,459.05
12 $40,459.05 $2,500.00 $500.00 $1,618.36 $45,077.42
13 $45,077.42 $2,500.00 $500.00 $1,803.10 $49,880.51
14 $49,880.51 $2,500.00 $500.00 $1,995.22 $54,875.73
15 $54,875.73 $2,500.00 $200.00 $2,195.03 $59,770.76
16 $59,770.76 $2,500.00 $0.00 $2,390.83 $64,661.59
17 $64,661.59 $2,500.00 $0.00 $2,586.46 $69,748.06
18 $69,748.06 $2,500.00 $0.00 $2,789.92 $75,037.98
Totals $45,000.00 $7,200.00 $22,837.98
Assuming 4% Growth
Assuming family income over $87,123

Amazing watching money grow like that isn’t it? Did you look closely at the table? Did you notice that the current CESG max for you is $7200, so once you reach that maximum, you won’t get any more CESG kick ins (for now, given time, all these max values for contributing and CESG may change). Also remember that once your child turns 18, you would get no more CESG kick in either.

Remember that the Growth and CESG funds, will be taxed, in your child’s name, (from the example $7200 + $22838)  so figure out how you wish to extract money from the account once your child goes to Trade School, University, College or any of the other Ministry Approved post secondary programs, to minimize any tax impacts on your child. This can get tricky if your child is lucky enough to work in a CO-OP Program.

You should also realize, that if your child leaves home, this will only really cover tuition and fees.

 

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Best Way to Save Your Money

I borrowed the concept from another article, but the idea is so flaming simple, I think it does need to be repeated.

The best way to save your money is to not spend it.

The simplicity of this is clear, but most folks just really don’t get it, do they? I have railed on about the Semantics of Money, but let’s get back to the basics on this one, and here are some simple questions I’d love to hear some opinions from my good readers.

Also very True

Also very True

Someone goes out and spends less on some interesting piece of stuff (maybe it was planned), is that person more likely to take the unspent money, and spend it on something else (due to the halo effect of saving money on the previous purchase)? I have caught myself doing the same thing, “I saved money, so I can splurge on something else”.

Conversely, does someone who decides not to buy something that was planned, less likely to have that kind of “halo of savings”, and thus less likely to splurge the “saved” money?

If someone spends time trying to figure out how much can be saved buying something, why isn’t the most important question, that is usually not asked,  “Do I need this?”. Spending less money is not saving your money, it is just using less. Saving money, is keeping the money in your pocket (or your bank account).

Have you caught yourself saying (or heard a friend say), “If I buy this on sale, I can get two of them”?

Have you heard someone else say, “I decided not to buy that thing, but because of me not spending the money, I’ll go buy something else”? I guess (as Mrs. C8j pointed out) that if you decided not to buy a $5000.00 TV, and decided to celebrate with a cup of coffee and a donut, that might not be too bad.

Which of those previous two statements are more likely? I’d like to think that the second one is more likely, but I must admit, I have caught myself doing the first statement (far too bloody often). Does impulse spending compared to planned spending change the decision point?

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Equifax and Their Information

So thanks to the Home Depot debacle with my account information being pilfered (evidently it is still going on in Canada), however, thanks to that I now have unlimited Equifax reports for an entire year.

Thanks to this, I have found about 4 credit accounts that I must close, as I don’t use them, and my opinion is the less credit vehicles available, the less likely it is that someone could pilfer them.

Social Insurance Number Example

Yes, they did have my SIN Number right

There were two other more interesting pieces of information that I collected from these very interesting reports (I run them once a week, just for fun, and to get my moneys worth).  The first and most interesting piece of information is that Equifax has my first name completely wrong. For those who haven’t figure it out my first name is Alan, however the name Alan has many interesting derivatives and spelling:

  • Allan  (I pronounce as ALL-AN)
  • Alyn (Welsh, and is actually pronounced Al-un)
  • Al (fricken’ heck never call me that)
  • Allen  (I pronounce ALL-EN)

Strangely, Equifax has associated with my correct Social Insurance Number the Allen spelling of my first name?!? To their credit they have my correct name  under their “Also Known As” section, however, I have never been known as Allen in my life.

The other interesting thing on my credit report is that I am evidently still employed by Nortel Networks. For my regular readers, that has not been true for more than 6 years now, guess they don’t know I am a Civil Servant now.

I suppose I am going to have to fill in a bunch of forms to get all this straightened out, but without having this report, I suppose I would never have known?

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Autumn , United Kingdom, Beer Money, and #theBestFin4TheWeek

It is Autumn here in Ottawa, the leaves are changing, there is a chill in the air and the MPs are back for their 20 days of work until Christmas. I am sure there is lots going on down on Rideau Street, lots of repairs on the Houses of Parliament and such, but what goes on in the House of Commons, is more of a mystery. Luckily, we also have a municipal election as well, with my doppelganger Jim Watson a shoo-in for re-election, but he has lost some weight, so I had better work on that, if I want to be mistaken for him again (that and shave off the beard).

Sandy McTire

It’s Sandy McTire™
from Canadian Tire™

The United Kingdom remained together, but what will this mean in terms of powers given to Scotland, Wales and the Channel Islands? Should be an interesting bit of Political Flim Flammery, as what keeps happening with Quebec Sovereignty, stay tuned, I am sure that will get back on the front burner soon as well.

The Ottawa Senators, sold the naming rights to Canadian Tire, for the arena in Kanata, and then the Sens made a tremendous announcement this week. At the Canadian Tire Center (during the exhibition season at least), you will be able to pay for your concessions (including beer) with Canadian Tire Money! Suddenly Sandy McTire can buy me a brew, for all the stuff I have bought at his store. In celebration the Sens beat the Leafs twice, causing Leaf nation to explode in a flurry of finger pointing.

My Writings for Week Ending September 26th

Autumn is in the air, which means leaves and figuring out how to get my car back into my garage.

Scotia Bank Value Visa

[click to continue…]

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NFC and Android Phones for Payment

Interesting, I received an E-mail from my bank (TD) pointing out that they now support using my Android -or- Blackberry phone ( no mention of the iPhone 6, since it only supports NFC for Apple Pay) to make small payments (tap and go), as an NFC (tap and go) device, if I have a supported credit card with them (which surprisingly, I do).

Smart Phone Credit cards

Now Your Phone is Your Wallet?

To quote TD’s e-mail to me:

Any TD EasyWeb customer with a supported Android or BlackBerry smartphone, eligible TD Credit Card and the TD app can enjoy using TD Mobile Payment.  The Android or Blackberry smartphone must be certified and enabled with Near Field Communication (NFC) technology (contactless) and a NFC SIM Card to securely store your payment information, and have a mobile plan with a participating carrier/service provider.

The nice part is that this is integrated into the TD Banking App, so there is a degree of security (I hope) with the app. I am not sure, but I hope I have to log into the App to be able to use the NFC capabilities of the app and phone (together), and not just enable it once, and then be able to willy nilly tap and pay (thus enabling anyone with my phone to do the same).

Is this a secure method of payment? I am not sure of the mechanics in the Android and Blackberry phones, however, the Android phones do have a reputation as being a little less secure than other phones (as all open systems do, when you let everyone see the source code, that includes the bad guys). Google has been working hard to improve Android’s reputation in the security area, but it is going to take a while to do that.

Am I recommending this service and TD? No, I am simply pointing out yet another interesting new way to spend your money. They keep making it easier and easier to spend your money.

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