As you may or may not have noticed, I updated the chart for one of our 2012 Financial Goals.  We met with our financial advisor last week and put $1000 into an RESP for our son.

I’ve shared how we save up our son’s money and the $1000 that we put in came entirely from money that he received as gifts when he was born and money that we’ve received from the government for bringing him into existence.  We have set up an automatic withdrawal for $100 each month that will be funded by some of this government money. Each month, we receive about $140 from the government so the other $40 will go towards his needs along with the $20 a month that we put into his budget category.  We will have to start putting more money into this category soon as we will have to pay for childcare once I go back to work in a couple of months.

By the year’s end, with the $100/month contributions (beginning April 1), we will have contributed $1900- just short of our $2500 goal.  There is a good chance that my son will receive some money for his birthday in which case that will be thrown in towards the $600 we have to make up.  Beyond that, he will just have to hope that we do well on our other goals as they have first priority before funding the extra $600 in the RESP account. :)

I actually have no desire to fully fund any of my kids’ post secondary education. I do wish to help them out- I realize that the cost of education has become prohibitively expensive for many and I don’t want my kids to feel that they have no options but at the same time, I want my kids to learn to create their own options.  We will have to see how this plays out when the time comes.. Maybe we will pay for their first year of education. Maybe we will pay tuition and have them cover their other expenses or vice versa. Honestly though, even if I win the lottery, I won’t be paying their way- it is important to me that my kids become self sufficient and if they aren’t already on their way there by college/university, they’ll get an important, lesson-learning shock.

It was important to me to choose a family plan when we opened our RESP.  I don’t want my kids to feel pressured to attend college or university so being able to move the money around between different children is important to me. That may sound funny but I found myself in a situation where I had a small sum of RESP money hanging over my head and it has completely stifled any desire to put it to use. I absolutely freeze when I think about it and it has just become something very awkward to think about for myself. Maybe I’ll talk more about that at some point. That story isn’t finished yet so we’ll see…

Our RESP is currently sitting in the Industrial Alliance Focus Balanced Fund under the advisement of our advisor.  I’m looking forward to seeing how this does and anxious to get our government grants! How do you get the most out of your RESP dollars? Are you planning to pay for your kids education entirely or will you be expecting them to contribute as well? Did I go the right route with the family plan or should I have done something else? I’d love to hear your thoughts and suggestions as this is new territory for me!!

 

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8 Responses to Open An RESP- Check!

  1. Andrea says:

    Congratulations! I know how much work it is to save for that initial deposit and then get enough information about the RESP to make an informed decision. Well done!

    I hope you keep blogging about your experience with the RESP as you reach milestone contributions and start receiving the grant money.

    We opened a plan for my husband’s daughter. His older two were too old for us to open a plan for them. I think the RESP is one the smartest tools our government has introduced.

    In my step-daughter’s case, we didn’t go the route of the family plan (no other siblings) and if she doesn’t use the money or all of it, the contributions minus the grants can be returned to my husband’s RRSP or he can withdraw the funds for his own education use.

    My step-daughter comes from a family where her mom doesn’t believe in supporting post-secondary education at all (I disagree here – I’m a fan of partial parental support where possible) and the children can live in their mother’s home while going to school. She has told each of her children they must earn a degree (I disagree here; post-secondary education is not for everyone and having taught in the college system, I have seen some students fumble their way through finding the right program of studies and they are just miserable at the time) and this itself is causing some stress.

    My husband’s two sons are struggling in their own way between figuring out if higher education is right for them and earning an income to pay their own ways. They each live on their own in different cities and I applaud their efforts to be independent.

    I would like to hear more about your on thoughts of the RESP program – what you learned while researching – and what stress or expectation you think it creates for the child.

    I know in the case of my step-daughter, she’s excited to go away to school and she’s a great candidate for a university education. However, she has no part-time job currently (she’s 16.5 yrs old) and expects we will be paying her full shot at school. We started her RESP when she was 14 so with such a late start and only so much money each month for contributions, we will have about enough for two years of tuition and books. We have told her she needs to start working and contributing her portion. She’s not altogether motivated right now to get a job.

    She seems to think student loans are the way to go. With both her parents and step-parents working, I’m not even sure for what she would qualify.

    Keep us posted on your progress!

    • Marianne says:

      My siblings didn’t qualify for student loans because of my parents’ income so my parents had to loan them the money and my siblings paid them back. I am the only child (youngest) that they opened a small RESP for (they helped my other siblings out in other ways) but I always felt guilty about it because they didn’t do this for my siblings. Also, because of the way I was raised I feel very awkward talking about money and as a result, I don’t know how much money is in the account- I think it’s a bit less than a years worth of tuition. There is so much confusion around the account that I thought I couldn’t even access it anymore because of my age until my mother mentioned that it was still there when I told her I opened one for my son. Obviously, I’ve never used it and I don’t know if I will. At this point I am indifferent.

      I would make sure that you are very clear with your step-daughter about how much money will be there for her to use towards her education and make sure she understands how much tuition costs and how much is a realistic entry level wage. Maybe she will get serious about a plan when she sees how difficult it will be to pay off those student loans.

      It is pretty sad that my husband and I are further ahead than all of our friends that went on to post-secondary education. Both of us started working right out of school- we sort of meant to go to college/university eventually but we have really good jobs so it seems counterproductive to pay money to go to school, lose wages and then start back in the work force at a much lower wage than where we left off all so that we can say we went to college/university. Our friends are saddled with debt and a lot of them are having a hard time finding jobs in their fields- don’t even get me started on all of our teacher friends… I don’t want my son to be saddled with mountains of student loan debt but I also want him to choose his education wisely and not waste it.

  2. Erica says:

    I feel a little funny answering this since I don’t have any kids, but this is something we’ve discussed many times. We are already planning on saving for our kids “future”, but a set amount. Like, approx. four years at a local public university. If they insist on going private, they’ll at least have a little to help out. We will do our best to instill money smarts in them, and encourage them to contribute to their fund with gift money or summer job money. I think, though, if they decide to take a different path than the traditional four-year college we would still let them have that money.

    Of course, I might think differently once we actually have college-aged kids but we’ll see!

    • Marianne says:

      That sounds like a good plan. I think it’s important to decide ahead of time what you will or will not cover and be very clear so that your kids can make clear choices based on your contributions.

  3. TB says:

    Too bad RESPs are only a Canadian thing. I’m sure we in the U.S. have got something equivalent and I should look into that!

    • Marianne says:

      I’m not too familiar with all of the saving vehicles available in the States but I thought the 529 plan was sort of similar to the RESP? The government grants that we get are pretty cool- not sure if you guys get those.

  4. Jeff says:

    It’s commendable that you have already started an RESP for your child.

    However:
    1.Since, I don’t know your income levels I can’t say whether an investment into your own RRSP would have been a better choice as you get a tax deferral. However, if you aren’t in the maximum tax bracket yet then personally I would have suggested TFSA instead of RESP. Interest earned in TFSA is just as tax free as the RESP and if you make a lump sum deposit to the RESP from the TFSA at the end of the year you will get the government grant on the RESP deposit + the tax free gains earned in the TFSA, which = government grant on tax sheltered investment income. Then rinse & repeat every year.

    2. You deposited $1000 into an RESP and your adviser suggested a 2.75% MER mutual fund!?, which only invests it’s funds in it’s own other mutual funds? huh? What sales charge option did he/she advise….. DSC? I’m assuming your “adviser” wants you to put the $200 grant money into it as well. Nice, well hopefully you don’t want to change your investment plan anytime soon with a minimum 2% withdrawal fee for the first 7 years. When you have a few minutes, which I know isn’t the easiest at this time of your life, research “Couch Potato investment strategy”. You’re young no better time to start learning about investing your own money strategically. You are working very hard to save your money and I hugely applaud that, please don’t give it away to someone or company in “fees”.

    As for paying for your child’s education, absolutely 100% if you can afford it. There are many, many opportunities between 1 & 18 to teach your children the life lessons of budgeting and saving, rather then your child starting their career under a mountain of school debt. However, certainly take care of your own financial well being first (TFSA & RRSP) and hopefully there will be funds at the end of the day to help your child minimize their personal debt as well.

    • Marianne says:

      Just the kind of advice I was hoping for! I hadn’t thought of using the TFSA to hold the money and transferring it into an RESP once a year. I will look into this further- seems like a cool strategy. We did optimize our RRSPs before looking at the RESP, that was very important to me.

      I was also concerned about the high MER on this fund- it is MUCH higher than anything else we have. In fact, this product is very different from anything else we have so I am completely unfamiliar with it. I have heard of the Couch Potato Investment Strategy but am not too familiar with it overall. I definitely have a lot to learn here.

      I will update as we make changes to our RESP plan.

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