So this week we’ve talked about RESPs and their uses and shown a real world example of how much money you can put away (and we know how much post secondary educations cost right now), but here are a few points to close with:
- An RESP is one part of your financial plan, PAY DEBT FIRST (getting out of debt is another way to have money when your kids go to school, to help them). RESP’s growth is sheltered but you are using AFTER TAX money, so RRSPs is another place where you should maybe put money before an RESP. Debt is paid with after tax money and GROWS without you paying, so debt reduction FIRST!
- Set up your RESP with a bank or brokerage house. I remember when I was young there were firms that did this, but they invoked huge penalties if your kids didn’t go to University (like you lost more than 1/2 the money you put in? I don’t remember exactly). The only penalty you should have to pay if your child doesn’t go to a Post Secondary institution (and the rules for what count as this are very wide) is paying tax on the growth and returning of the grant portion to the government. Look around and do lots of RESEARCH (look at the financial blogs on the web too, they have great tips).
- Start planning now and let the power of compounding work for you.
- A co-worker said, “Why would I put money away for my kids to go to school, my parents didn’t!”, which is another plan as well (and you shouldn’t feel guilty if you can’t save for your kids education, for whatever reasons).
Debt reduction first!!!