RESP's for kids....

[Nufy]

I am looking to establish a new RESP plan for each of my kids.


Just wondering what everyone else is using and your opinions.

[Masked Bandit]

I just set mine up at my bank. I'm sure there are better ones out there with respects to the rate of return but I was mostly after the portion that the government kicks in (20% on the first $2000).

[Paul]

Originally posted by Masked Bandit
... but I was mostly after the portion that the government kicks in (20% on the first $2000).

2007 this changed to 20% on the first $2500.

Talk to your bank.

[Masked Bandit]

Originally posted by Paul


2007 this changed to 20% on the first $2500.

Talk to your bank.


Thanks for the tip. I was going to have to go in and adjust anyways as number 2 will be showing up any day now.

[Rav4Guy]

there have been many changes to the contribution room, grants, and even the forms. Talk to your advisor and he/she can't help you maximize your contributions.

pre-congrats on #2 then. :clap:

[ZC_CIVIC]

Contrats on a 2nd...

I just set up a savings account for my daughter its not able to be touched until 2025, the day she turns 18 i put about 200 bucks a month into it so without the interest there should be around 43000 in there for her to do as she pleases...So she better thanks me once she hits 18...lol...i didnt even get 20 bucks from my rents when i was 18...haha

[lint]

Originally posted by ZC_CIVIC
Contrats on a 2nd...

I just set up a savings account for my daughter its not able to be touched until 2025, the day she turns 18 i put about 200 bucks a month into it so without the interest there should be around 43000 in there for her to do as she pleases...So she better thanks me once she hits 18...lol...i didnt even get 20 bucks from my rents when i was 18...haha

If you put $200/month in there for 18 years, she will have substantially more than $43K when she's 18. At 8% it should be somewhere in the $140K range.

[2EFNFAST]

Originally posted by lint


If you put $200/month in there for 18 years, she will have substantially more than $43K when she's 18. At 8% it should be somewhere in the $140K range.

More like 80k

[topazdude]

86359.45$

[Bimmer88]

Good thing is if your kids never use it to go to school, you can roll it over into your RRSP. :D

[ZC_CIVIC]

i didnt add the interest rate in there just the 200X12X18..that was like 43200 or somthing like that...but who knows how much it will be...but yeah i dont think she will use it for school iether...haha she will probably go out and buy a car or somthing..

[pinoyhero]

^Thats the spirit, way to pull for your kids.

[lint]

Originally posted by 2EFNFAST


More like 80k

Let's split the diff and say $111K.
http://www.canadianbusiness.com/my_money/planning/education/resp_calculator/tool.jsp
Using $0 current, $2400/year and 8% return

Year RESP Contribution CESG RESP + CESG Balance at end of year
1 $2,400.00 $400.00 $2,800.00 $3,013.31
2 $2,400.00 $400.00 $2,800.00 $6,267.69
3 $2,400.00 $400.00 $2,800.00 $9,782.42
4 $2,400.00 $400.00 $2,800.00 $13,578.32
5 $2,400.00 $400.00 $2,800.00 $17,677.90
6 $2,400.00 $400.00 $2,800.00 $22,105.44
7 $2,400.00 $400.00 $2,800.00 $26,887.19
8 $2,400.00 $400.00 $2,800.00 $32,051.48
9 $2,400.00 $400.00 $2,800.00 $37,628.91
10 $2,400.00 $400.00 $2,800.00 $43,652.53
11 $2,400.00 $400.00 $2,800.00 $50,158.05
12 $2,400.00 $400.00 $2,800.00 $57,184.00
13 $2,400.00 $400.00 $2,800.00 $64,772.04
14 $2,400.00 $400.00 $2,800.00 $72,967.11
15 $2,400.00 $400.00 $2,800.00 $81,817.79
16 $2,400.00 $400.00 $2,800.00 $91,376.53
17 $2,400.00 $400.00 $2,800.00 $101,699.96
18 $1,200.00 $240.00 $1,440.00 $111,384.74

[Xtrema]

My dad's post secondary education was almost free.

My post post secondary cost me $20K (12 years ago), living @ home.

My sister post secondary cost her $30K (7 years ago), living @ home.

So if the cost of education is rising by 40% every 5 years, and your kid is just born, you're looking at $134K to obtain a degree of any kind in an average school, living @ home.

So $111K is nothing.

My question is, can you still get full student loan if your parents have a RESP? And use RESP to repay the loan when school is done?

[armae]

Both my kids are set-up with Children's Educational Fund Inc, http://cefi.ca/en/index2.html; I get Air Miles too :)

[CLiVE]

Originally posted by Xtrema
My dad's post secondary education was almost free.

My post post secondary cost me $20K (12 years ago), living @ home.

My sister post secondary cost her $30K (7 years ago), living @ home.

So if the cost of education is rising by 40% every 5 years, and your kid is just born, you're looking at $134K to obtain a degree of any kind in an average school, living @ home.

So $111K is nothing.

My question is, can you still get full student loan if your parents have a RESP? And use RESP to repay the loan when school is done?

As another benchmark my post secondary cost me ~$80K living away from home. This includes tuition, housing, all expenses.
Completed in 2001.

[Rav4Guy]

Originally posted by lint


Let's split the diff and say $111K.
http://www.canadianbusiness.com/my_money/planning/education/resp_calculator/tool.jsp
Using $0 current, $2400/year and 8% return

Year RESP Contribution CESG RESP + CESG Balance at end of year
1 $2,400.00 $400.00 $2,800.00 $3,013.31
2 $2,400.00 $400.00 $2,800.00 $6,267.69
3 $2,400.00 $400.00 $2,800.00 $9,782.42
4 $2,400.00 $400.00 $2,800.00 $13,578.32
5 $2,400.00 $400.00 $2,800.00 $17,677.90
6 $2,400.00 $400.00 $2,800.00 $22,105.44
7 $2,400.00 $400.00 $2,800.00 $26,887.19
8 $2,400.00 $400.00 $2,800.00 $32,051.48
9 $2,400.00 $400.00 $2,800.00 $37,628.91
10 $2,400.00 $400.00 $2,800.00 $43,652.53
11 $2,400.00 $400.00 $2,800.00 $50,158.05
12 $2,400.00 $400.00 $2,800.00 $57,184.00
13 $2,400.00 $400.00 $2,800.00 $64,772.04
14 $2,400.00 $400.00 $2,800.00 $72,967.11
15 $2,400.00 $400.00 $2,800.00 $81,817.79
16 $2,400.00 $400.00 $2,800.00 $91,376.53
17 $2,400.00 $400.00 $2,800.00 $101,699.96
18 $1,200.00 $240.00 $1,440.00 $111,384.74

Well,

You can put in $2500/year up to a lifetime max of $50,000. PLUS CESG, CLB, and the Alberta Grants, the child would be getting a lot more.

[lint]

Originally posted by Rav4Guy


Well,

You can put in $2500/year up to a lifetime max of $50,000. PLUS CESG, CLB, and the Alberta Grants, the child would be getting a lot more.

I was using the $200/month that zc_civic indicated for the example.

If you have the means, the best return will be to dump $50K in there and let it grow for 18 years.

[Rav4Guy]

^ true but then you don't get future governemnt grants.

[lint]

Originally posted by Rav4Guy
^ true but then you don't get future governemnt grants.

They've run the scenario in the finance section of the globe and mail. Even forgoing the rest of the CESG, the compounding of the initial $50K lump sum will outweigh the loss of the additional free money from the gov't. You will end up quite a bit ahead.

[Rav4Guy]

I completely agree... provided you have $50,000 to spare.

If money isn't a problem, here's a strategy one can use... create a RESP account as well as a in-trust account for your children.

It all depends on the person's situation.

[Euro838]

Another thing to think about is that you should max out your RRSP contributions before putting into an RESP.

If you are making a decent income, you'll be paying in the 30-40% tax range so you'll get a lot more back by maxing out your RRSP before putting into the RESP where you'll only get back max 20%.

You could always setup a trust or something for your kids for tax deferral. It's easier to be disciplined with an RESP but you'll get more return/benefit by maxing out your own RSPs first.

Just a thought, opinions?

[lint]

Originally posted by Euro838
Another thing to think about is that you should max out your RRSP contributions before putting into an RESP.

If you are making a decent income, you'll be paying in the 30-40% tax range so you'll get a lot more back by maxing out your RRSP before putting into the RESP where you'll only get back max 20%.

You could always setup a trust or something for your kids for tax deferral. It's easier to be disciplined with an RESP but you'll get more return/benefit by maxing out your own RSPs first.

Just a thought, opinions?

Max out RRSPs until you drop to the next tax bracket. After that, any more contribution would be better left for the following year as your rate of return will not be as significant unless you can drop down another tax bracket.

But if you max out RRSP and don't have the funds to contribute to the RESP early, you lose out on the 18 years of compounding. Paying for their education by withdrawing from your RRSP doesn't seem like a very tax efficient strategy.

[Euro838]

Originally posted by lint


Max out RRSPs until you drop to the next tax bracket. After that, any more contribution would be better left for the following year as your rate of return will not be as significant unless you can drop down another tax bracket.

But if you max out RRSP and don't have the funds to contribute to the RESP early, you lose out on the 18 years of compounding. Paying for their education by withdrawing from your RRSP doesn't seem like a very tax efficient strategy.

The strategy wouldn't be to withdraw from your RSP as chances are you won't be in the lower income bracket or retiring when your kids are hitting 18 or going to post-secondary.

I guess I'm just saying if you had a choice between the two, the first should be RSP then RESP. You could always create a joint account for you and your child for investments and have them claim the income as they are the lower earner.

[lint]

Originally posted by Euro838

I guess I'm just saying if you had a choice between the two, the first should be RSP then RESP. You could always create a joint account for you and your child for investments and have them claim the income as they are the lower earner.

How is a joint account any different than the RESP? Aside from the fact that you loose out on the CESG? With your plan, you would still only contribute to that account once your RRSP is maxed out.

This is where opinions differ. I have 18 years to save up for my kids post secondary, and 30+ years to save for retirement, so there's more urgency in the RESP. Also, the $200/month in the RESP is relatively small in comparison to our monthly RRSP contributions. To note, we make sizable RRSP contributions, but we don't max out, nor do we feel the need to. Our strategy is to strike a balance, not choosing one over the other.

[blownz]

^ very true about the balance.

I put $200 a month in for my 1 year old and will do the same for the next baby coming in a few months. I 'only' put a grand a month into rrsp's which doesn't come close to maxing it out, but this seems like the best compromise for me right now. Losing out on the $400 a year of free money for my child doesn't seem worth it right now just to have some extra money in my rrsp's.