Saving up for your children's education

[Euro838]

The "catch" with the CST and others like them is that once you sign with them, you can't get out or even move your money. They have a large "enrollment" fee that will be reimbursed at plan maturity but if you want move for any reason, it will cost you a lot. They also don't give you much in terms of updates and stuff. I'd probably suggest going with a bank.

[Feruk]

Do you guys see any benefit to contributing more than $2,500/year? I personally don't, but would be interested in a different opinion.

I know a buddy who intends to use the proceeds to have the kid pay him "rent" while in university. Interesting idea. Grow the money tax-free and have it redistributed to yourself in small increments years from now.

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If I recall from memory the government portion cant go into stocks (i.e gov does not want you gambling with their money) so it would go into a GIC (I think, I can't remember).

Incorrect. The RESP I have is fully invested in ETFs. In fact it's in CWW (global water ETF).

[ExtraSlow]

As a method of avoiding taxes, maybe it makes sense to overcontribute. I never have.

[Euro838]

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Do you guys see any benefit to contributing more than $2,500/year? I personally don't, but would be interested in a different opinion.

The only reason why you would over contribute is if you have already maxed out your TFSA and needed a place for your investment to grow tax-free.

[holden]

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Do you guys see any benefit to contributing more than $2,500/year? I personally don't, but would be interested in a different opinion.

I know a buddy who intends to use the proceeds to have the kid pay him "rent" while in university. Interesting idea. Grow the money tax-free and have it redistributed to yourself in small increments years from now.


Incorrect. The RESP I have is fully invested in ETFs. In fact it's in CWW (global water ETF).

Hmm, that's an interesting idea. There's a lifetime RESP contribution limit of $50,000. The max you can contribute to still get the matching 20% is $36,000. So there is an extra $14,000 to play around with, sort of like a TFSA. Of course if you are doing everything on the level you would need to claim that "rent" as income on the parent's taxes also. So in the end you would probably end up paying more tax because you would be paying income tax on the entire amount you already paid tax on plus the gains.

[Manhattan]

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Incorrect. The RESP I have is fully invested in ETFs. In fact it's in CWW (global water ETF).

Fully invested in a single ETF? CWW is an interesting ETF and I think its a good one. But for a RESP where there's no need to take unnecessary risk (what would you do with a million dollar RESP anyway) why not fully diversify?

[nzwasp]

We contribute $5k every year for our two kids, the RESP was at 40k last time I looked - Our oldest kid is 5 youngest is 3. I find it annoying to find the 5k to contribute per year to it but the financial guy we see keeps telling us that education is going to cost even $150k or something like that for a BA in 15 years time. I personally think that is complete BS. I did my schooling 18 years ago and it cost me $15k for my total schooling (i did a IT degree). And now I believe its around 30k for the same thing. Sure that is 100% more than 15k but its not going to be fucking 500% more than that in 15 years time.

[Swank]

^maybe he's thinking an overseas program including moving, accommodation, and living expenses? No way tuition/books/supplies alone should get anywhere near that, like you say.

[Manhattan]

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We contribute $5k every year for our two kids, the RESP was at 40k last time I looked - Our oldest kid is 5 youngest is 3. I find it annoying to find the 5k to contribute per year to it but the financial guy we see keeps telling us that education is going to cost even $150k or something like that for a BA in 15 years time. I personally think that is complete BS. I did my schooling 18 years ago and it cost me $15k for my total schooling (i did a IT degree). And now I believe its around 30k for the same thing. Sure that is 100% more than 15k but its not going to be fucking 500% more than that in 15 years time.

Because you're talking to a salesman. Your "financial guy" only cares about how much you put in today because he's making a commission or has targets to hit. For tuition all you need is for it to keep up with inflation.

Even if I have the means to put in enough RESP for a full ride through school I don't think it's a great idea. Based on my experience kids who don't pay anything to put themselves thru school mostly waste their time because school is "free" to them. They end up wasting it by dropping classes and having a great time on your dime. Asking them to pay a portion of their own tuition is the better way to go. Nothing else is handed to you in life so why coddle them til they're well into their mid 20's.

[suntan]

Should end up with around 80K once my first is old enough. I'm not expecting it to pay for all their schooling. I want them to understand that things cost money.

[HiTempguy1]

An engg degree is at least $10k tuition per year now. That's $40k off the hop before books and anything else. So easily getting close to $15k per year just in the bare costs.

Then you look at living expenses (unless they live with you) and things start getting crazy. Especially if they go to a school where living is expensive (GTA or van area).

Even with minimum wage at $20 by that time, living costs in those areas will vastly outstrip any low end wage growth.

So double current books and tuition to $25k to $30k each. Before ANYTHING else. $150k isn't unreasonable.

I worked a $20/hr job and lived with my parents during the summer. Just living still cost a ton of money.

But I also dont agree that living hand to mouth for 4+ years teaches a lot, unless your parents raised you to be a useless idiot prior to post secondary.

[dirtsniffer]

School is expensive for sure. I just plan on helping. The government portion sounds great. Also good to know you can spend all the government money first

[sabad66]

Pro tip: if one of the parents is a US citizen and the other is not, make sure only the non-US parent is the only subscriber to the RESPP. As soon as the US parent is listed, it creates a lot of unnecessary paperwork/hassle on the US tax return