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! Thanks to that I have these really useful RESP tips too!
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.
Useful RESP Tips
- 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 must be deposited to get this, an initial $500 gets put in even if no money is deposited. Most banks are leery 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.
- 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).
- 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.