I’ll admit it: Saving for our children’s education was not a priority for me. In fact, I didn’t open an RESP until my oldest child was 9. We had a mortgage to pay, some large expenses the average Canadian family does not have to pay, and RRSPs and TFSAs to fund. We’d also heard quite a few horror stories about group RESPs so we weren’t sure where to start.
His introductory article How To Set Up The Safest, Simplest And Cheapest RESP Account is particularly useful to time-strapped worried parents.
What Happens to Your Children’s RESPs if You Die Before They Use Them?
Kati Basi, in a guest post at the Blunt Bean Counter, says: “Many of my clients assume that their children (as the beneficiaries under their RESP) would automatically receive the RESP upon their death, just as if the children were beneficiaries under their Registered Retirement Savings Plan (“RRSP”). This assumption is, for the most part, dead wrong.” Read how to protect your children’s RESPs, especially the grant money, in “New Will Provisions for the 21st Century – RESPs .“ Then update your will or ask the person who funded your children’s RESPs to update theirs.
Group Scholarship Plan RESPs Versus Bank RESPs
Before banks started offering no fee RESPs where investors could buy GICs or mutual funds, and long before self-directed brokerages allowed RESPs, the only choice most parents had was to enroll in a Group Scholarship Plan. These plans are much riskier than bank RESPs. You don’t get all of your money back if your child does not go on to post-secondary education. You also may have to pay very large fees if you want to transfer your plan elsewhere.
Ellen Roseman details a good example of these unexpected costs in Roseman: [Group Scholarship Plan] RESPs are easy to start and hard to leave.
CBC News provides an in depth look at these group plans in Group RESPs: reading the fine print: Popular plans aren’t for everyone .The plans are not actually evil they just sometimes seem that way particularly if a person signed up for one without really understanding how they work.
Using the RESP Money for Education
Big Cajun Man describes some of his personal experiences with taking money out of his children’s RESPs to pay for their university enrollment. While the government’s required paperwork was short, he was startled at how much other paperwork TD required. So was I! You can read the details at RESP: and More Trees Died.
- Why Would You Buy This instead of Contributing to an RESP, RRSP, TFSA or Mortgage?
- Gifts that Help Save for Your Child’s Future without Contributing to an RESP
Are you contributing to a RESP for your child or children? Or is your plan helping your children pay their way through school? Are you happy with the process? Please share your experiences with a comment.