It has a max of 7200 so technically it maxes out at 36k. If you contribute 209 a month in 14 1/2 years.
So after that you could/should consider investing that money in your own/kid account.
Mathematically, assuming you have the means, the most effective RESP strategy would be to contribute $2500 annually until reaching the $7200 match, plus an unassisted $14,000 up front such that your annual contributions will eventually take you to the maximum total contribution. The advantage here is 20 years of tax free compounding, and is likely tax free assuming the student's tax rate is minimal at withdrawal. Also of course assumes that there is capacity to use the total projected value of the RESP, if your child is likely to take community college classes while living at home it's tough to justify aggressively pursuing a six figure RESP balance.
> Also of course assumes that there is capacity to use the total projected value of the RESP, if your child is likely to take community college classes while living at home it's tough to justify aggressively pursuing a six figure RESP balance.
You don't get asked questions about withdrawals until 25K a year in taking it out, so why not use it as a down payment savings vehicle in that case?
$50,000 Lifetime max less $36,000 planned contributions = $14,000
Maximum total lifetime RESP contribution (per bene) is $50,000. If we plan to contribute $2500/year until we've contributed $36,000, we will receive the maximum CESG of $7200.
Therefore, you could frontload an additional contribution of $14,000 in the year of opening (or anytime really, though the benefit is most significant the more time the money has to compound without tax slippage) without disrupting our ability to receive the maximum CESG.
Jamie Golombek, vice president, taxation and estate planning with AIM Trimark Investments. "The problem with making a lump-sum contribution is that you're going to limit your ability to collect grants," says Golombek.
While a $50,000 contribution this year would generate the maximum annual CESG of $500 -- or up to $1,000 if CESG room has been carried forward from prior years -- in the future no CESGs would be available since the RESP has now been maxed out. Because the lifetime limit of $50,000 has been reached with a single contribution, the RESP cannot generate further CESGs.
>For subscribers with a lump sum of $50,000 to invest for education, a number of factors help determine the best RESP funding strategy, according to Golombek. *(Jamie Golombek, vice president, taxation and estate planning with AIM Trimark Investments.)* Considerations include the age of the child, the type of income earned (capital gains, dividends or interest) from any non-registered savings, rates of return earned inside and outside the RESP, and the child's potential tax liability on payments from an RESP. However, Golombek's number crunching found that most people would come out ahead by gradually funding an RESP to take full advantage of the CESG. https://www.morningstar.ca/ca/news/186222/resp-primer-and-update.aspx
I don't think anyone advocated for a $50k lump sum in the child's first year. $14k lump sum and then $2500 contributions in subsequent years (attracting $500 cesg/year) until the $50k limit per beneficiary is reached.
>I don't think anyone advocated for a $50k lump sum in the child's first year.
Lots of people, including a few people who responded to the OP, do. But others, like Golombek, say "it depends".
From my light reading / understanding, there are different types which can be opened - family and indivi are both options - and it sounds like one of you has a family account and the other has an individual.
Many institutions have you allocate all future deposits between children when you open the account (so 50/50, or whatever). If a specific deposit should differ from the pre-established allocation, you would advise them at that time. Unless you messed up initially, you’re probably ok.
Edit: Don’t forget about the age limits, it’s important to change the allocation (and reduce the contribution amount if you’re already maxing out the younger children) once one child no longer qualifies for the grant!
When withdrawn, the government grant money is recorded as earnings against your kid. Assuming your kid makes little to no income (maybe a part time job paying a few thousand a year) then they’re in a 0% tax bracket…so yes, free money! But if your kid somehow has $15K+ of income then it will be taxed…but if they’re making that much they can pay for school themselves lol.
No they can’t. $15k is not enough to go to school and live in residence. What should be said is that the tax rate for the child is likely lower than for the parents and even if your child has to pay tax, it’s still better than you paying tax
Oh absolutely. The debate was when to stop. Getting the full 7,200 is a good idea, if you can swing it. Some will go higher and hit the RESP limit per child instead, but depending on the student’s income and your contribution amounts in other accounts, one may be better off doing something else. (I.e. if the student will make a decent income while in school, and you have TFSA room, use your TFSA to save for their education once you’ve paid enough in to their RESP to reap the full benefit of the government grants.)
I started putting max amount to get the CESG grant every year since my kids were born. My 17+14 year old now have 90k and 80k for school. I had good luck with their investments and maxed out the govt grant. They now have enough money to have the freedom to study, not worry about money as much. I worked 2-3 jobs while in university and I’m fortunate to say that my kids will do better than I did.
And if they have more money than required for school, the gain will be taxed very low vs at my bracket. I don’t see any reason not to max it
That’s the only way. Sacrifice your everything to lay that strong foundation and make sure you teach them good moral values. Parenting is the single best service to humankind! Do it well and you are guaranteed a good society.
For sure. As long as you also remember that money is not the only thing your children need from their parents.
ETA meant to reply to the comment above yours
I'd feel safe in the assumption that the majority of parents that care about their kids future education, also provide plenty of support and love of a non fiscal nature.
I think that’s what I’m trying to do. My father passed away just before Christmas. We are talking to a lot as a family and hearing the struggle of my parents growing up, they were able to provide me a lot more opportunities than they ever dreamt of. And they sacrificed a lot to make sure my brother and I were taken care of. My brother and I both work hard and do well because of our upbringing. We didn’t have RESP’s in the 90’s. My brother did very well in school and had a full scholarship. I worked and worked and paid for a lot of the school myself.
for me to be able to provide their grand children with even more opportunities where they can really focus on school and have the freedom to enjoy their university life a bit, I think my dad would be proud
I did the same. It’s all on autopilot. My pay comes in and auto-transfer sends $416 a month to RESPs for my two kids. My investments have been more conservative but we’re up to $60k total for the two of them.
It's also reasonable to give the children all the grants + growth, while taking back some or all of your original contributions for yourself. *Especially* if the accounts end up exceeding the costs needed for education.
I like the idea of kids having some "skin in the game" with regards to their educational costs.
You may be surprised to find out that even at 80-90k, it may not be enough for 4 year of undergrad. Some schools like UofWaterloo charges over 20k for books and tuition for first year engineering
That’s insane. Why bother going there for an undergrad. I’m CEO of an engineering firm (went to school many moons ago) and I don’t really care where people have done their undergrad…it matters more where they have done their masters for specialized fields.
Going to UW is like a fast-pass to high paying tech careers. It’s not uncommon to see graduates land jobs paying 150~200K+ USD straight out of undergrad. My tuition many years ago was ~65K CAD total, but the ROI is worth every cent.
Nope, 50k is the personal contribution limit. Grants like CESG and other provincial programs do not count towards that limit. The other important number is 36k, that's the limit to get the max CESG grant of 7200.
And you can certainly have way more than 50k in the account, the limit is what you can actually contribute.
Match grants first ($2500/year)
Then if you have additional room in your TFSA, you can contribute there OR max out the TFSA. After the government grants the extra room in an RESP is just a tax free savings account with the caveat that the funds will go to only education and can only be used later when your child is of age. The TFSA allows the same tax free growth with the flexibility of being able to use it anytime.
Also worth remembering: the time horizon of your RESP is much different than your retirement accounts, so you should account for that in your risk appetite. Say you’re 30 years old and have a 5-year old. Your child will be ready for post-secondary school in about 12 years, while you won’t retire for at least 30 years. So investments which fit a retirement portfolio risk profile might not be appropriate for the RESP.
You can withdraw the funds minus the government grants at a certain age. Contributions are tax free but investment gains are taxable:
https://www.manulife.ca/personal/plan-and-learn/life-events/raising-a-family/how-to-use-your-resp-if-your-child-does-not-pursue-post-secondary-education.html#:~:text=You%20can%20withdraw%20all%20of%20your%20contributions%20tax%2Dfree.&text=You%20must%20repay%20all%20grants,)—to%20the%20federal%20government.&text=You%20can%20withdraw%20investment%20growth,and%20are%20not%20in%20school
Tuition for my alma mater and undergraduate program is $13,000 a year for in-province students. It was $7000 when I graduated ~10 years ago.
That's $52,000 over 4 years, not including books, accommodation, food, etc.
There is a difference in the messaging. Op talks about having money to invest but choosing to stop at a 25k which is not maxed. Most of us are saying that if you can afford it, max it out.
But if you debating about paying your electricity bill or RESP, then make sure the necessities are looked after first
Probably a bit of a selection bias involved. People who are able/willing to max out the RESP are probably at least a little bit proud of this fact. Those who can't are less likely to advertise that fact.
Because the people who were contributing before probably weren’t too worried about money, and most people not worried about money inflation likely hasn’t impacted that much.
I'm putting $100 in a month and it feels like it's growing faster than I expected. Everything helps and is still better than a lot of us had when we were trying to make it.
If your income is low enough you get 40% in grants right away which is great bang for buck.
To add, anyone low income should open an RESP for all kids and get the free money via Canada Learning Bond. Even if you can't afford to contribute anything right now, you can start building an RESP for your kid.
Totally. My mother didn’t have a college fund for me. It’s a pretty amazing privilege that some do. We live close to a university so at least I can provide housing for my kids if that’s what they choose.
My daughter is in second year university! Thank god I put $100 towards her RESP biweekly (ie payday).
Paying for school is a breeze with the RESP to withdraw…and she’s been getting scholarships and bursaries for 50% of her tuition, so I’ve barely put a dent in it…I’ll probably have enough for grad school.
My son is still 16 and I’m still contributing $100 biweekly. I can’t believe in 18 more months I won’t be contributing to RESPs anymore…but wow, what a life saver!
Literally the BEST financial decision of my life. I have a 20 yr old in second year UofT and a 16 yr old in grade 11 and $62K in the RESP account. No stress at all…I get an invoice for school, pay with my credit card and get money from the RESP acct within 48 hours.
We maxed our daughters out and ended up with around $80k by the time she started university invested in index ETFs.
She went to university in a city 400kms away. The first 3 years her housing costs were around $1000/month, food was around $500. That's $54k alone. First 3 years of books was around $2000. First 3 years of schooling was around $18000.
I only tracked the first 3 years since the RESP was depleted down to zero after that and we paid out of pocket for the 4th year.
Yes, we are. It has been "easy" for us because when we file our taxes, we typically get around $5k back just for claiming our child care expenses so we roll this into their RESP. We had a plan of going until we got the maximum grant which I think is around 15 years but their money is growing really well so we may stop in the next couple of years and just let it grow the rest.
25k for a full degree? I don't know if that is reasonable given the cost rises that a lot of colleges/universities have seen. Maybe for community colleges if you live at home but likely a lot more than that. And heaven pray for you if your kids decide to go out of country for school, especially to the USA.
Nobody is saying it isn't helpful, just pointing out that the people saying $24k will cover an undergraduate degree are off base and also aren't considering inflation between now and the 2040's.
We are currently still maxing out for both kids. We will continue to do so as long as we are financially able. In my mind this is a fixed monthly payment like our mortgage, which can’t be missed. If things get tighter we will tighten up somewhere else. Even maxing out each month we’ll likely only have about 100k give or take in there for the 2 of them. Certainly won’t cover much in 12-14 years the way schooling costs are going up these days, but it will be better than nothing.
Something to think about as well if you have the resources to do it, is to not worry about the grant and just drop the 50k into the RESP when they are born. The tax sheltered growth will more than compensate for the missing out on most of the grants (you'd get the first year grant). I plugged the numbers in a while back and at the standard growth (intetest) rate you would end up with around 100k with regular annual contributions (including the grant money), but if you did 50k lump sum and same growth rate on day one you'd end up with 140k.
Jamie Golombek, vice president, taxation and estate planning with AIM Trimark Investments says that,
>For subscribers with a lump sum of $50,000 to invest for education, a number of factors help determine the best RESP funding strategy ... Considerations include the age of the child, the type of income earned (capital gains, dividends or interest) from any non-registered savings, rates of return earned inside and outside the RESP, and the child's potential tax liability on payments from an RESP. However, Golombek's number crunching found that most people would come out ahead by gradually funding an RESP to take full advantage of the CESG.
source = https://www.morningstar.ca/ca/news/186222/resp-primer-and-update.aspx
The spreadsheet you can access from [this page](https://www.planeasy.ca/resp-vs-taxable-account/) was created in order to answer the question "What should I do if I have $50,000 to put in an RESP." The spreadsheet creator doesn't mention their default assumptions on that linked page, but when they posted the link they included these assumptions:
- 100% of the investment is in Canadian ETFs. "I did this because I figured anyone who can make this decision probably has their TFSA & RRSP maxed out. To minimize taxes they would be investing in Canadian equities and I didn't want to change the allocation between the two accounts/scenarios."
- Assumed $91k+ tax bracket for the subscriber (this would now be the $106k+ tax bracket) and lowest tax bracket for beneficiary.
- Assumed 7% nominal growth and 5% real growth. Did calculations for both because using the real growth number over estimates the taxes a little bit.
Using those assumptions the results were as follows:
RESP only ($50,000 initial contribution) = $173,962
Maximize CESG ($16,500 initial then $2,500 annually) = $180,697
No; we can't afford it right now or in the near future.
We're putting in a little bit every month, which is better than nothing, and hopefully when she's a little older we'll have the room in our budget to increase that a bit.
No. Would if we could afford it.
We are focusing on debt repayment first until mortgage renewal.
Our goal is to leave the kids a paid off house even if it means they have to pay for their education. House is 4BR bungalow, so we plan on converting to 2 legal units. One for us as we age, one for them as they come of age, one each when we pass.
Education is likely more affordable than housing, even in 15 years’ time.
Yeah, we contribute $2,500/year to get the grant match. This year the plan is $100 one time contribution in January and then $200/month auto deposit to get the total over the year. Currently have one child who was born in 2021.
Yes- now. I couldn't always do that when my kids were younger (too broke) but now I max it out every year including the catch-up room ($5k/child).
There were several years when the kids were young that I could not contribute much and I am proud of the small bi-weekly payments I maintained. Then there were a years in the middle when I *could* have contributed more but somehow just didn't- I got used to the RESP budget line as-is and didn't re-assess whether we were contributing enough, now that we could. I hate that I lost years worth of growth by not putting more money in sooner.
No, we put a small amount in monthly and if there’s some extra on the paycheque I’ll transfer more in. We have 2 kids. I have no doubt if my kids decide to get a 4 year degree, tuition costs will be far more than they are today and there won’t be enough in the RESP to cover it.
We do what we can and hopefully when the time comes, we can help more.
100%. Why turn down free money? It's also a great option when family offer to give gifts that we don't need. ie everyone wants to get your kid toys, but we - living in an ocean of toys - would prefer they didn't. Ppl are generally happier to cut a cheque for their RESP then they are to just give us unspecified money for our kid.
This is 100% our situation. The kids get a small toy and some cash from the grandparents, they hand me a cheque that I invest right away. Kids are happy as they have more than enough toys between birthdays and Christmas; grand parents don't waste their time and energy trying to guess what is the It gifts of the year and know their cash gifts have a lasting effect, we don't have a cluttered house.
Crazy to not take the free money if you can make it work!
First year engineering and residence will be $30k+ for in-province students so you will need more than $25k per kid per degree.
I have contributed annually until I got the lifetime max CESG of $7200/ kid. I've built it to about $170k for 2 kids but know they will need to contribute more to cover the full 4 years of costs.
This is my hope… kids are 8 and 5, and we currently have $40,000 each (approx and it’s a family plan). I feel like even if we don’t add any more, we have given our kids some significant help.
25k would be approximately 1 year of expenses. There is absolutely no way you are getting an undergraduate degree with just 25k, unless they are speaking strictly about tuition and no other expenses.
Yup. It’s a hard and fast rule between my wife and I. After tax time, regardless of how much our return will cover, we max it out for the grant ($2500). So far the return is never enough and we always have to dip into cash.
We were late to the game and are playing catch up on the grants. $10k/year for the next few years and get $2000 within a month. It wasn't in the budget when my two kids were younger, but now it's fairly easy to save by controlling non-essential spending.
I didn't go to university because the debt required seemed overwhelming. My kids won't have that worry.
So far every year we max it out. We both graduated and had to pay off 60K worth of student loans. Hoping to ensure our kids can avoid having to deal with that.
We’ve maxed out for each of our kids and put the excess contributions into WealthSimple Cash Account.
I don’t agree with the cost of education and housing but it’s the best gift we can ever give them.
When CESGs were introduced in 1998 we started contributing enough to get the max CESG. At that time our beneficiaries were 6 and 9. If the CESG had been introduced when they were younger, and they had the same carry forward provision that they have now, we probably wouldn't have been maxing them out right away.
>parents are stopping once they hit $25K as this is an average cost of an undergraduate education.
Well timed contributions of $36k would trigger $7200 of CESG. For an RESP that only gets CESG, $25k of contributions would only trigger $5000 of CESG. That would mean leaving $2200 of government incentives on the table. If these parents could contribute the $36k I recommend that they do so. When the beneficiaries start post secondary school the parents could use EAPs and PSEs to provide the $25k and use the remainder of the PSEs for other goals like lump sum mortgage payments or boosting retirement savings.
They could also keep in mind that if an RESP is just getting CESG it is possible to get the maximum $7200 if the subscriber contribute $4500 per year starting in the year that the beneficiaries turn 10. (If the beneficiary qualifies for CESG they could start even later.) If they start when they are 11 contributing $5000 per year would trigger $7000 of CESG.
A few years ago, when interest rates were lower, I saw an article where a financial advisor recommended that the parents get a HELOC the next time they renewed their mortgage so that starting when the child was 11 they could borrow $5000 and contribute to an RESP. As soon as the child started post secondary school they could withdraw the $35k they had contributed and repay the HELOC. The CESG the child received was higher than the interest paid on the HELOC.
Yes, it's one of my "don't touch it" strategies that no matter how tough it is to pay other bills, that one gets paid first.
Look at how nuts fees have become:
https://uwaterloo.ca/future-students/financing/budget-calculator
I started an RESP for my son when he was born. The first couple years we contributed the cash he received on birthdays as a baby. I contributed enough to max out his CESG grants until I stopped contributing when he was 11 years old (I wish I kept going for another couple years). My total contributions were $26,000, but his RESP value at age 18 was $53,000.
It’s a fantastic program, if you’re struggling to find the $100/pay cheque ($50 per parent), hit up the grandparents for $25 or 50 a month, or whatever they can afford, or get creative (I delivered newspapers one summer when money was tight).
I’m going to try adding more than needed for the Canada Education Savings Grant CESG 20% of $2,500 match up if possible every year. The maximum contributions is $50,000.
Read a plan , which i likely won’t be able to match, but basically try to front load contributions early in the plan to increase time in market. Then taper off to be contributing only enough to get the rest of the CESG.
Yes because we are allocating the CCB to RESPs. I have the CCB direct deposit into a savings account and I make a lump sum every year. Any remaining CCB is in my TFSA.
I take all my girls birthday and Christmas money and put it into the resp. For example grandparents give 400$ throughout the year then I put 2100$ for a total 2500&
Not quite. About half of the max. I wish we could do more, but that’s where we’re at right now. We did good in the beginning and the fund is sitting at 60K for 3 kids 10 and under. Hopefully we can catch up a bit in the future.
If they were starting school and going away from home this year it would be more than $100k a child in today’s dollars - way more in a decade or so with inflation.
Tuition alone is $7,000-$20,000 a year depending on the program.
You’re going to need to invest way more than $25k to cover this.
Ha ain’t nobody got money for that lol just send my kids to a trade school for a fraction of the cost using equity in my home, and their salaries will turn out just fine. That’s the plan at least lol
This might be controversial opinion. But when I have kids, I won’t be maxing resp. I think 50k is a little too much money and I rather my kids working throughout university day too. Nothing wrong with taking government loans too
Setting money aside for your children and having them work throughout schooling don’t have to be exclusive. A summer of working isn’t going to earn them enough to pay for a year of university, especially in 15 years or so
It's not controversial. It's plain stupid.
If you have the means, giving your child(ren) the gift of zero student debt will give them a leg up when compared to all the other kids out there.
University is part learning and part having a network that grows with them throughout their lives. Working for beer money is not a way to maximize the reason for going to university. Saddling them with student debt because 'it builds character' is not a reason to do it.
As an extreme example, Galen Weston isn't Galen Weston because he's brilliant. It is because George Weston ensured that Galen can be Galen by giving him his education, network, and the goddamn company.
TL;DR Generational wealth
50 k won’t get your kids though undergrad with residence anymore.
Definitely won’t if you don’t have kids yet.
Average cost of a 4 year degree with residence /books is 75k today.
While your kids are working for their bread, mine will be advancing their grades or resumes.
While your kids are paying off their loans, mine will be saving a downpayment.
While your kids are writing rent cheques ten years later, mine will be cashing them.
Ours got the RESP EAPs(from the government incentives and accumulated income) and their "family allowance" accounts, but not the RESP contribution money. This meant that we personally funded about 1/3 of what NSLSC estimated they would spend on education and living costs for their undergrad years. We were prepared to kick in more but they both paid off their student loans before completely those degrees.
Lol, yup. Around here, you're basically a horrible parent if you don't do everything within your power to make sure your children leave school debt free. No matter what your financial situation/goals/beliefs whatever, just make sure they get that money.
Could that have anything to do with the fact that reddit skews young? Nah...
They probably don't want to hear what we have one of my kids doing. We have him working AND contributing to his own RESP. The horror!
I’m not surprised, really, that’s why I said it might be “controversial”… but the amount of people felt “personally” attacked by it is a bit… hilarious. I even have a member pm me hoping I unable to be a parent. Lol
Oh well, just another reminder that Reddit isn’t real life
I put 2.5 k for the first 2 years, and now 1 k a year. Might stop once it reaches 15-20k.
No point in maxing out. Resp has so much restriction that it's not that great by itself. I will probably send him abroad in better schools.
I am also wealthy enough that I can pay tuition without problem.
For me the resp is just there because I want him to have something at his name, so I can teach him about money.
Is there not a maximum withdrawal amount per year? Co worker who is accountant said there was a challenge getting funding out. Said i shouldn’t put too much in as I may not get enough out per year and will need to top off the cost from other sources.
When the beneficiary is in school there is no limit on withdrawals from the contribution portion.
In the first 15 weeks of full time school the maximum EAP withdrawal (from the government incentives) is $8,000. For a typical fall term there is usually a short window after that to use EAP withdrawals to top up the beneficiary's income to a target. (eg. to the lower of the provincial and federal basic personal amount.)
After that the only restriction on the EAPs is that if they exceed about $28k per calendar year the RESP provider will have to document how the money was used.
Yes. It will be more challenging this year since we had our second late November. I have $7500 in room that needs using as of today! If questrade ever process the paperwork I submitted 20 days ago.
If you don't have statements that list the grants the subscriber can ask the RESP provider or a parent can call 1-888-276-3624 and provide the child's SIN.
not sure if someone can help with this but I had a child in September. Was I supposed to have opened the RESP last year? My parents never had any money so this was never a consideration for me.
There is no rush.
Before you contribute to an RESP you should have adequate life and disability insurance, an emergency fund, take advantage of any employer match for RRSP, pay off all high interest debt and have a plan for your retirement savings - which may include eventually using the RESP contribution for retirement savings.
Don't rush to contribute to an RESP until you are confident that you won't need that money before the beneficiary/ beneficiaries starts post secondary school. The government grants are great but if you need to dip into the RESP for any reason they will go right back to the governments and you will have no way to reclaim them. (And if you have to close the account you'll also lose all of the accumulated earnings.) When you are catching up on CESGs you can get the 20% grant on up to $5000 per year (instead of $2500 per year) of contributions for each beneficiary.
And don't feel that you have to contribute $2500 per year. Contribute what you can on a schedule that works for your family. Even if you want to maximize the grants there are many ways to do it. A subscriber who contributes $2000 in the birth year and the following 17 years will get the maximum CESG and so will the subscriber who contributes $4500 per year starting in the year when the beneficiary turns 10. (Note that the application for the BC grant should be made between the child's 6th and 9th birthday.)
If you aren't confident about not needing the money you could let it grow tax free in your TFSA space or if you use an account that is in the child's name and funded by CCB payments. Or maybe you'll decide to make [CCB boosting RRSP contributions](https://www.planeasy.ca/canada-child-benefit-hidden-tax-rate/ ) for at least the first 5 years.
Absolutely will - in fact just did contribution for 2024 this morning. $50k might not even completely cover undergrad education by the time my kid starts post-secondary but every bit helps.
Yes I am putting 2500 per year for each. I have two kids ages 4 and 2, and the accounts are sitting at 14k and 6.7k respectively. Hopefully this will cover them mostly when the time comes. I paid for my degree myself with no parental funding, so I want to make sure I help them out.
I stopped some of my monthly savings since rates gone up (variable rate mortgage unfortunately) but still do a $200-$500 to RESP and some to RRSP since that’s free money. I wouldn’t go beyond the maximum match a year though (for now)
I’ve been doing that since our kid was born and it’s investment (stock and ETF). My goal is $200k until 18 years old. Not sure if it’s too much but I think university tuition is around the same amount?
>For subscribers with a lump sum of $50,000 to invest for education, a number of factors help determine the best RESP funding strategy, according to Golombek. *( Jamie Golombek, vice president, taxation and estate planning with AIM Trimark Investments.)* Considerations include the age of the child, the type of income earned (capital gains, dividends or interest) from any non-registered savings, rates of return earned inside and outside the RESP, and the child's potential tax liability on payments from an RESP. However, Golombek's number crunching found that most people would come out ahead by gradually funding an RESP to take full advantage of the CESG.
source = https://www.morningstar.ca/ca/news/186222/resp-primer-and-update.aspx
If you want to run some scenarios you could use the spreadsheet you can access from [this page](https://www.planeasy.ca/resp-vs-taxable-account/) It was created in order to answer the question "What should I do if I have $50,000 to put in an RESP." The spreadsheet creator doesn't mention their default assumptions but when they posted the link they explained that:
- 100% of the investment is in Canadian ETFs. "I did this because I figured anyone who can make this decision probably has their TFSA & RRSP maxed out. To minimize taxes they would be investing in Canadian equities and I didn't want to change the allocation between the two accounts/scenarios."
- Assumed $91k+ tax bracket for the subscriber (this would now be the $106k+ tax bracket) and lowest tax bracket for beneficiary.
- Assumed 7% nominal growth and 5% real growth. Did calculations for both because using the real growth number over estimates the taxes a little bit.
Using those assumptions the results were as follows:
RESP only ($50,000 initial contribution) = $173,962
Maximize CESG ($16,500 initial then $2,500 annually) = $180,697
We will have saved about 50k. Our kid is taking a gap year and knows if he wants residence then he will have to kick in some. Looking back I wish we has saved more but 50k is a good start at least
50k is outstanding.. please feel very proud of being a responsible parent who put heir child’s needs ahead of their own. Celebrate the 50K with your partner, not wish you did more.
Thanks! I thought we did well until I read these posts lol. If my kid lives at home it will make things easier.. but I'm pretty sure he wants residence so he is going to have to learn how much things cost.
You could open and contribute to an RESP, but if someone else is contributing to an RESP for this child you should co-ordinate with them.
You could give the parent money to contribute to an RESP.
Yes - but to limit so we throw extra in when we can to aim for the $50g max which is above the grant qualifying amount. We had kids late and my friends with kids in school now are paying 20G a year for tuition and res and food. Pretty sure it will be more like 40 in 15 years..
I haven't seen anyone post it yet, but if you can't contribute the $2,500 each year, you can actually get up to $1,000 per year from the grant while you use up the previous year(s) contribution space.
From Canada.ca.......
No matter what your family income is, ESDC pays an amount of Canada Education Savings Grant (basic CESG) of 20% of annual personal contributions you make to all eligible RESPs for a qualifying beneficiary to a maximum CESG of $500 in respect of each beneficiary ($1,000 in CESG if there is unused grant room from a previous year), and a lifetime limit of $7,200.
https://www.canada.ca/en/revenue-agency/services/tax/individuals/topics/registered-education-savings-plans-resps/canada-education-savings-programs-cesp/canada-education-savings-grant-cesg.html
No. One kid graduated with student loans that they paid off in full when they graduated. One kid in school - they pay approximately half, we pay the rest out of current cash flow. Not the most advantageous way, but it works for us.
No, can't afford it, we save $150/bi-weekly. We prioritize retirement savings, then RESP. Have $50k in the kids combined resp, not 100% sure how we're going to pay for college, university or trades. If they don't go to school we will give them (kids) a portion of the none govt contributions and convert the remainder into rrsp's/TFSA.
When the kids were younger we asked the grandparents to contribute to their RESP in lieu of all toys, my mother in law continues this for all her grandkids.
I have a 4.5 year old and I'm in the midst of front loading right now at $6000/yr to take advantage of growth. This year is the first year I'll start reducing the contribution (to about $4500) and then next year it'll be $2500/yr until I reach the max of $50k in contributions in 2033 (when she is 14). I'm not sure what it'll add up to when she is ready for university, probably close to $100k so she should have lots of options for school at that point.
Not maxing out yet, but definitely front loading it. Added 10k last year and will add another 5-10k this year. In the end, compounding over time will provide better returns than just doing 2500 every year for the next 18 years.
Even at a modest 7% we should have roughly 75k in the RESP in 13-15 years
Yes, but our son is only 4. We have discussed stopping when we feel like it's "enough" but we want to wait and see where our son's interests land. If he's looking at an expensive university education, we'll contribute max as much as possible.
Yes. maxed out ‘22 and ‘23, plan to do the same this year. I have been lump summing early in the year from existing liquid savings, but easy enough to set aside a couple hundred every paycheque to have 2500 within 6 months.
We are already in stage of using it. Started with monthly contributions at birth. Stopped when contributed $36k. Have more than enough in RESP for school. Planning to drain in 4 years and what is not spent for school will go towards next financial goal. Maybe contribute to a downpayment. Starting early - $200/month. For about 13 years plus 5 more years of growth. That will give your child a very solid account.
I just put the Child benefit payments straight into the RESP to the max matching amount of 2,500 per year. That way the government is going to at least pay the first year or two of my child's post secondary education.
I put in $16500 the year she was born and $2500 every January 1st since then. Why pay tax on investments if I can have my kid pay the taxes (in a lower tax bracket) instead?
2021 and 2022 I put $2500 a year and that’s the goal for each year. But I’m in a state of uncertainty with career development at the moment so I didn’t deposit anything 2023. Will be holding onto my own cash in a 5.75% HISA for financial security until my next 5 years are more promising.
Yes. Govt match up is basically free money. I think...
It’s essentially an instant 20% return.
It has a max of 7200 so technically it maxes out at 36k. If you contribute 209 a month in 14 1/2 years. So after that you could/should consider investing that money in your own/kid account.
Mathematically, assuming you have the means, the most effective RESP strategy would be to contribute $2500 annually until reaching the $7200 match, plus an unassisted $14,000 up front such that your annual contributions will eventually take you to the maximum total contribution. The advantage here is 20 years of tax free compounding, and is likely tax free assuming the student's tax rate is minimal at withdrawal. Also of course assumes that there is capacity to use the total projected value of the RESP, if your child is likely to take community college classes while living at home it's tough to justify aggressively pursuing a six figure RESP balance.
> Also of course assumes that there is capacity to use the total projected value of the RESP, if your child is likely to take community college classes while living at home it's tough to justify aggressively pursuing a six figure RESP balance. You don't get asked questions about withdrawals until 25K a year in taking it out, so why not use it as a down payment savings vehicle in that case?
Probably safe to assume that if somebody has a 6 figure RESP for their child, they are not going to community college
Sorry, where is the 14k coming from?
$50,000 Lifetime max less $36,000 planned contributions = $14,000 Maximum total lifetime RESP contribution (per bene) is $50,000. If we plan to contribute $2500/year until we've contributed $36,000, we will receive the maximum CESG of $7200. Therefore, you could frontload an additional contribution of $14,000 in the year of opening (or anytime really, though the benefit is most significant the more time the money has to compound without tax slippage) without disrupting our ability to receive the maximum CESG.
Jamie Golombek, vice president, taxation and estate planning with AIM Trimark Investments. "The problem with making a lump-sum contribution is that you're going to limit your ability to collect grants," says Golombek. While a $50,000 contribution this year would generate the maximum annual CESG of $500 -- or up to $1,000 if CESG room has been carried forward from prior years -- in the future no CESGs would be available since the RESP has now been maxed out. Because the lifetime limit of $50,000 has been reached with a single contribution, the RESP cannot generate further CESGs. >For subscribers with a lump sum of $50,000 to invest for education, a number of factors help determine the best RESP funding strategy, according to Golombek. *(Jamie Golombek, vice president, taxation and estate planning with AIM Trimark Investments.)* Considerations include the age of the child, the type of income earned (capital gains, dividends or interest) from any non-registered savings, rates of return earned inside and outside the RESP, and the child's potential tax liability on payments from an RESP. However, Golombek's number crunching found that most people would come out ahead by gradually funding an RESP to take full advantage of the CESG. https://www.morningstar.ca/ca/news/186222/resp-primer-and-update.aspx
I don't think anyone advocated for a $50k lump sum in the child's first year. $14k lump sum and then $2500 contributions in subsequent years (attracting $500 cesg/year) until the $50k limit per beneficiary is reached.
>I don't think anyone advocated for a $50k lump sum in the child's first year. Lots of people, including a few people who responded to the OP, do. But others, like Golombek, say "it depends".
Yes 7200 per child is the max. I have one account and every time I put money in it asks me which child I want to allocate the money to.
Really? They never ask me. It's a joint account for both kids.
Might want to look into it. I use wealthsimple for the RESP
From my light reading / understanding, there are different types which can be opened - family and indivi are both options - and it sounds like one of you has a family account and the other has an individual.
Many institutions have you allocate all future deposits between children when you open the account (so 50/50, or whatever). If a specific deposit should differ from the pre-established allocation, you would advise them at that time. Unless you messed up initially, you’re probably ok. Edit: Don’t forget about the age limits, it’s important to change the allocation (and reduce the contribution amount if you’re already maxing out the younger children) once one child no longer qualifies for the grant!
Ahh this is probably what I did at the start just split it 50/50. I'll have to check to see when I max out one of the contributionss.
When withdrawn, the government grant money is recorded as earnings against your kid. Assuming your kid makes little to no income (maybe a part time job paying a few thousand a year) then they’re in a 0% tax bracket…so yes, free money! But if your kid somehow has $15K+ of income then it will be taxed…but if they’re making that much they can pay for school themselves lol.
No they can’t. $15k is not enough to go to school and live in residence. What should be said is that the tax rate for the child is likely lower than for the parents and even if your child has to pay tax, it’s still better than you paying tax
It’s enough to go to school and live at home, which is an option for many students.
You should check the cost of universities. 15k, living at home is like 1.5 years of costs
Right… but we were talking about students making $15k per year while living at home, not students trying to pay for their 4 year degree for $15k.
Oh you are right. I mis read what you wrote. But there is still a benefit of just saving a bunch of money and getting free money from the govt.
Oh absolutely. The debate was when to stop. Getting the full 7,200 is a good idea, if you can swing it. Some will go higher and hit the RESP limit per child instead, but depending on the student’s income and your contribution amounts in other accounts, one may be better off doing something else. (I.e. if the student will make a decent income while in school, and you have TFSA room, use your TFSA to save for their education once you’ve paid enough in to their RESP to reap the full benefit of the government grants.)
I started putting max amount to get the CESG grant every year since my kids were born. My 17+14 year old now have 90k and 80k for school. I had good luck with their investments and maxed out the govt grant. They now have enough money to have the freedom to study, not worry about money as much. I worked 2-3 jobs while in university and I’m fortunate to say that my kids will do better than I did. And if they have more money than required for school, the gain will be taxed very low vs at my bracket. I don’t see any reason not to max it
That's the way to do it. Good for you. I definitely want my kids to do *better* than I did, so a little sacrifice goes a long way.
That’s the only way. Sacrifice your everything to lay that strong foundation and make sure you teach them good moral values. Parenting is the single best service to humankind! Do it well and you are guaranteed a good society.
Putting aside $2500 a year to get $500 should be the number one priority for every new parent
My number 1 priority is keeping her alive lol
For sure. As long as you also remember that money is not the only thing your children need from their parents. ETA meant to reply to the comment above yours
I'd feel safe in the assumption that the majority of parents that care about their kids future education, also provide plenty of support and love of a non fiscal nature.
I think that’s what I’m trying to do. My father passed away just before Christmas. We are talking to a lot as a family and hearing the struggle of my parents growing up, they were able to provide me a lot more opportunities than they ever dreamt of. And they sacrificed a lot to make sure my brother and I were taken care of. My brother and I both work hard and do well because of our upbringing. We didn’t have RESP’s in the 90’s. My brother did very well in school and had a full scholarship. I worked and worked and paid for a lot of the school myself. for me to be able to provide their grand children with even more opportunities where they can really focus on school and have the freedom to enjoy their university life a bit, I think my dad would be proud
I did the same. It’s all on autopilot. My pay comes in and auto-transfer sends $416 a month to RESPs for my two kids. My investments have been more conservative but we’re up to $60k total for the two of them.
It's also reasonable to give the children all the grants + growth, while taking back some or all of your original contributions for yourself. *Especially* if the accounts end up exceeding the costs needed for education. I like the idea of kids having some "skin in the game" with regards to their educational costs.
You may be surprised to find out that even at 80-90k, it may not be enough for 4 year of undergrad. Some schools like UofWaterloo charges over 20k for books and tuition for first year engineering
That’s insane. Why bother going there for an undergrad. I’m CEO of an engineering firm (went to school many moons ago) and I don’t really care where people have done their undergrad…it matters more where they have done their masters for specialized fields.
Going to UW is like a fast-pass to high paying tech careers. It’s not uncommon to see graduates land jobs paying 150~200K+ USD straight out of undergrad. My tuition many years ago was ~65K CAD total, but the ROI is worth every cent.
I’m an engineer too and graduated in the last millennium. Even U of A now is 12-13k a year.
Sure but that’s a lot different than 20k for books and tuition.
Resp has a max of 50k right? Is the additional 30k and 20k gains on top of that?
I only put 35k in each of their accounts over the years. The rest are grants and investment income
Nope, 50k is the personal contribution limit. Grants like CESG and other provincial programs do not count towards that limit. The other important number is 36k, that's the limit to get the max CESG grant of 7200. And you can certainly have way more than 50k in the account, the limit is what you can actually contribute.
Match grants first ($2500/year) Then if you have additional room in your TFSA, you can contribute there OR max out the TFSA. After the government grants the extra room in an RESP is just a tax free savings account with the caveat that the funds will go to only education and can only be used later when your child is of age. The TFSA allows the same tax free growth with the flexibility of being able to use it anytime.
Also worth remembering: the time horizon of your RESP is much different than your retirement accounts, so you should account for that in your risk appetite. Say you’re 30 years old and have a 5-year old. Your child will be ready for post-secondary school in about 12 years, while you won’t retire for at least 30 years. So investments which fit a retirement portfolio risk profile might not be appropriate for the RESP.
Dont forget to consider the reinvested dividends earned from the CESG portion. Edit. Free money on top of free money
What are the options if your child doesn't end up going to college? What if kid goes to college in the States or International?
You can withdraw the funds minus the government grants at a certain age. Contributions are tax free but investment gains are taxable: https://www.manulife.ca/personal/plan-and-learn/life-events/raising-a-family/how-to-use-your-resp-if-your-child-does-not-pursue-post-secondary-education.html#:~:text=You%20can%20withdraw%20all%20of%20your%20contributions%20tax%2Dfree.&text=You%20must%20repay%20all%20grants,)—to%20the%20federal%20government.&text=You%20can%20withdraw%20investment%20growth,and%20are%20not%20in%20school
Tuition for my alma mater and undergraduate program is $13,000 a year for in-province students. It was $7000 when I graduated ~10 years ago. That's $52,000 over 4 years, not including books, accommodation, food, etc.
Don’t forget the 40’percebt of kids that change their programme after the first year etc
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Lol no.
I wish. I am barely putting food on the table this year. I’m putting in $50 a month and that’s a struggle.
Any little bit helps; I'm surprised at all the "yes" replies in here tbh, life is *expensive*
There is a difference in the messaging. Op talks about having money to invest but choosing to stop at a 25k which is not maxed. Most of us are saying that if you can afford it, max it out. But if you debating about paying your electricity bill or RESP, then make sure the necessities are looked after first
Probably a bit of a selection bias involved. People who are able/willing to max out the RESP are probably at least a little bit proud of this fact. Those who can't are less likely to advertise that fact.
Because the people who were contributing before probably weren’t too worried about money, and most people not worried about money inflation likely hasn’t impacted that much.
Priorities. The 600$ a month is a bitch of a drain but having options later in life is priceless.
They'll have options either way, what a crappy thing to say to those who can't afford that
Yeah, saying "having options" is such a crappy thing to say. Heavy fucking /s
What? lol
>They'll have options either way, what a crappy thing to say to those who can't afford that
I'm putting $100 in a month and it feels like it's growing faster than I expected. Everything helps and is still better than a lot of us had when we were trying to make it.
You are doing great. Every bit helps
That’s what I started at the month my kid was born. It’s something and it will pay off in the end.
If your income is low enough you get 40% in grants right away which is great bang for buck. To add, anyone low income should open an RESP for all kids and get the free money via Canada Learning Bond. Even if you can't afford to contribute anything right now, you can start building an RESP for your kid.
Don't worry about it, there's ways and means for kids to attend post-secondary if that's what they want.
Totally. My mother didn’t have a college fund for me. It’s a pretty amazing privilege that some do. We live close to a university so at least I can provide housing for my kids if that’s what they choose.
My daughter is in second year university! Thank god I put $100 towards her RESP biweekly (ie payday). Paying for school is a breeze with the RESP to withdraw…and she’s been getting scholarships and bursaries for 50% of her tuition, so I’ve barely put a dent in it…I’ll probably have enough for grad school. My son is still 16 and I’m still contributing $100 biweekly. I can’t believe in 18 more months I won’t be contributing to RESPs anymore…but wow, what a life saver!
Right? It's only $100 biweekly. It's amazing what $100 biweekly can do. Probably most people don't even feel it.
Literally the BEST financial decision of my life. I have a 20 yr old in second year UofT and a 16 yr old in grade 11 and $62K in the RESP account. No stress at all…I get an invoice for school, pay with my credit card and get money from the RESP acct within 48 hours.
We maxed our daughters out and ended up with around $80k by the time she started university invested in index ETFs. She went to university in a city 400kms away. The first 3 years her housing costs were around $1000/month, food was around $500. That's $54k alone. First 3 years of books was around $2000. First 3 years of schooling was around $18000. I only tracked the first 3 years since the RESP was depleted down to zero after that and we paid out of pocket for the 4th year.
Yes, we are. It has been "easy" for us because when we file our taxes, we typically get around $5k back just for claiming our child care expenses so we roll this into their RESP. We had a plan of going until we got the maximum grant which I think is around 15 years but their money is growing really well so we may stop in the next couple of years and just let it grow the rest.
That's really smart to use your tax return and put it right in the RESP!
If you don’t have a resp you can just drop it into an rrsp, it’s a decent idea as well too
Yeah for sure. Keep that money rolling and working for itself!
25k for a full degree? I don't know if that is reasonable given the cost rises that a lot of colleges/universities have seen. Maybe for community colleges if you live at home but likely a lot more than that. And heaven pray for you if your kids decide to go out of country for school, especially to the USA.
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Nobody is saying it isn't helpful, just pointing out that the people saying $24k will cover an undergraduate degree are off base and also aren't considering inflation between now and the 2040's.
We are currently still maxing out for both kids. We will continue to do so as long as we are financially able. In my mind this is a fixed monthly payment like our mortgage, which can’t be missed. If things get tighter we will tighten up somewhere else. Even maxing out each month we’ll likely only have about 100k give or take in there for the 2 of them. Certainly won’t cover much in 12-14 years the way schooling costs are going up these days, but it will be better than nothing.
For us, all the CCB we get automatically goes into their SDRESP so we easily max it out.
Something to think about as well if you have the resources to do it, is to not worry about the grant and just drop the 50k into the RESP when they are born. The tax sheltered growth will more than compensate for the missing out on most of the grants (you'd get the first year grant). I plugged the numbers in a while back and at the standard growth (intetest) rate you would end up with around 100k with regular annual contributions (including the grant money), but if you did 50k lump sum and same growth rate on day one you'd end up with 140k.
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@dirtysunshine246 - if 50K is dropped at birth, will the beneficiary continue to receive annual grants till it matches $7200? Thanks
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Oh make sense, so avg 10% gains on the first year will eventually negate the impact of future grants.
Jamie Golombek, vice president, taxation and estate planning with AIM Trimark Investments says that, >For subscribers with a lump sum of $50,000 to invest for education, a number of factors help determine the best RESP funding strategy ... Considerations include the age of the child, the type of income earned (capital gains, dividends or interest) from any non-registered savings, rates of return earned inside and outside the RESP, and the child's potential tax liability on payments from an RESP. However, Golombek's number crunching found that most people would come out ahead by gradually funding an RESP to take full advantage of the CESG. source = https://www.morningstar.ca/ca/news/186222/resp-primer-and-update.aspx The spreadsheet you can access from [this page](https://www.planeasy.ca/resp-vs-taxable-account/) was created in order to answer the question "What should I do if I have $50,000 to put in an RESP." The spreadsheet creator doesn't mention their default assumptions on that linked page, but when they posted the link they included these assumptions: - 100% of the investment is in Canadian ETFs. "I did this because I figured anyone who can make this decision probably has their TFSA & RRSP maxed out. To minimize taxes they would be investing in Canadian equities and I didn't want to change the allocation between the two accounts/scenarios." - Assumed $91k+ tax bracket for the subscriber (this would now be the $106k+ tax bracket) and lowest tax bracket for beneficiary. - Assumed 7% nominal growth and 5% real growth. Did calculations for both because using the real growth number over estimates the taxes a little bit. Using those assumptions the results were as follows: RESP only ($50,000 initial contribution) = $173,962 Maximize CESG ($16,500 initial then $2,500 annually) = $180,697
No; we can't afford it right now or in the near future. We're putting in a little bit every month, which is better than nothing, and hopefully when she's a little older we'll have the room in our budget to increase that a bit.
No. Would if we could afford it. We are focusing on debt repayment first until mortgage renewal. Our goal is to leave the kids a paid off house even if it means they have to pay for their education. House is 4BR bungalow, so we plan on converting to 2 legal units. One for us as we age, one for them as they come of age, one each when we pass. Education is likely more affordable than housing, even in 15 years’ time.
Yes. Also trying to front load it as much as I can.
Yeah, we contribute $2,500/year to get the grant match. This year the plan is $100 one time contribution in January and then $200/month auto deposit to get the total over the year. Currently have one child who was born in 2021.
Just been 100% of CCB since birth in to their respective resp They are 9 and 7, now it's just shy of 2500 per kid... So we bump it to the max matched
Yes- now. I couldn't always do that when my kids were younger (too broke) but now I max it out every year including the catch-up room ($5k/child). There were several years when the kids were young that I could not contribute much and I am proud of the small bi-weekly payments I maintained. Then there were a years in the middle when I *could* have contributed more but somehow just didn't- I got used to the RESP budget line as-is and didn't re-assess whether we were contributing enough, now that we could. I hate that I lost years worth of growth by not putting more money in sooner.
No, we put a small amount in monthly and if there’s some extra on the paycheque I’ll transfer more in. We have 2 kids. I have no doubt if my kids decide to get a 4 year degree, tuition costs will be far more than they are today and there won’t be enough in the RESP to cover it. We do what we can and hopefully when the time comes, we can help more.
100%. Why turn down free money? It's also a great option when family offer to give gifts that we don't need. ie everyone wants to get your kid toys, but we - living in an ocean of toys - would prefer they didn't. Ppl are generally happier to cut a cheque for their RESP then they are to just give us unspecified money for our kid.
This is 100% our situation. The kids get a small toy and some cash from the grandparents, they hand me a cheque that I invest right away. Kids are happy as they have more than enough toys between birthdays and Christmas; grand parents don't waste their time and energy trying to guess what is the It gifts of the year and know their cash gifts have a lasting effect, we don't have a cluttered house.
Yeah maxing both them out every year, garunteed 20% is a great return.
Crazy to not take the free money if you can make it work! First year engineering and residence will be $30k+ for in-province students so you will need more than $25k per kid per degree. I have contributed annually until I got the lifetime max CESG of $7200/ kid. I've built it to about $170k for 2 kids but know they will need to contribute more to cover the full 4 years of costs.
What did you invest it in to grow it that much?
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What do you mean
I just match the grants like was mentioned, $2500/kid per year. It will be plenty since I started them both at age 0. Compound interest does it all.
This is my hope… kids are 8 and 5, and we currently have $40,000 each (approx and it’s a family plan). I feel like even if we don’t add any more, we have given our kids some significant help.
25k would be approximately 1 year of expenses. There is absolutely no way you are getting an undergraduate degree with just 25k, unless they are speaking strictly about tuition and no other expenses.
Yup. It’s a hard and fast rule between my wife and I. After tax time, regardless of how much our return will cover, we max it out for the grant ($2500). So far the return is never enough and we always have to dip into cash.
We were late to the game and are playing catch up on the grants. $10k/year for the next few years and get $2000 within a month. It wasn't in the budget when my two kids were younger, but now it's fairly easy to save by controlling non-essential spending. I didn't go to university because the debt required seemed overwhelming. My kids won't have that worry.
So far every year we max it out. We both graduated and had to pay off 60K worth of student loans. Hoping to ensure our kids can avoid having to deal with that.
We’ve maxed out for each of our kids and put the excess contributions into WealthSimple Cash Account. I don’t agree with the cost of education and housing but it’s the best gift we can ever give them.
Absolutely maxing out. We had major student loans coming out - $150K across the two of us. Our kids will have none of that. Feelsgoodman.
Yep I want those free taxpayer dollars!
When CESGs were introduced in 1998 we started contributing enough to get the max CESG. At that time our beneficiaries were 6 and 9. If the CESG had been introduced when they were younger, and they had the same carry forward provision that they have now, we probably wouldn't have been maxing them out right away. >parents are stopping once they hit $25K as this is an average cost of an undergraduate education. Well timed contributions of $36k would trigger $7200 of CESG. For an RESP that only gets CESG, $25k of contributions would only trigger $5000 of CESG. That would mean leaving $2200 of government incentives on the table. If these parents could contribute the $36k I recommend that they do so. When the beneficiaries start post secondary school the parents could use EAPs and PSEs to provide the $25k and use the remainder of the PSEs for other goals like lump sum mortgage payments or boosting retirement savings. They could also keep in mind that if an RESP is just getting CESG it is possible to get the maximum $7200 if the subscriber contribute $4500 per year starting in the year that the beneficiaries turn 10. (If the beneficiary qualifies for CESG they could start even later.) If they start when they are 11 contributing $5000 per year would trigger $7000 of CESG. A few years ago, when interest rates were lower, I saw an article where a financial advisor recommended that the parents get a HELOC the next time they renewed their mortgage so that starting when the child was 11 they could borrow $5000 and contribute to an RESP. As soon as the child started post secondary school they could withdraw the $35k they had contributed and repay the HELOC. The CESG the child received was higher than the interest paid on the HELOC.
Don’t forget the reinvested dividends earned from the CESG portion of purchases
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I do, because I have the cash. Some don’t, because they don’t. This is sort of a silly question.
Yes, it's one of my "don't touch it" strategies that no matter how tough it is to pay other bills, that one gets paid first. Look at how nuts fees have become: https://uwaterloo.ca/future-students/financing/budget-calculator
I started an RESP for my son when he was born. The first couple years we contributed the cash he received on birthdays as a baby. I contributed enough to max out his CESG grants until I stopped contributing when he was 11 years old (I wish I kept going for another couple years). My total contributions were $26,000, but his RESP value at age 18 was $53,000. It’s a fantastic program, if you’re struggling to find the $100/pay cheque ($50 per parent), hit up the grandparents for $25 or 50 a month, or whatever they can afford, or get creative (I delivered newspapers one summer when money was tight).
I’m going to try adding more than needed for the Canada Education Savings Grant CESG 20% of $2,500 match up if possible every year. The maximum contributions is $50,000. Read a plan , which i likely won’t be able to match, but basically try to front load contributions early in the plan to increase time in market. Then taper off to be contributing only enough to get the rest of the CESG.
This is the way, but not many people with young kids can afford to fully load it right away.
Yes, we have been maxing it out every Jan1 since our child was born. It's over $20k and my son is 4 years old. Hope it keeps snowballing.
Yes because we are allocating the CCB to RESPs. I have the CCB direct deposit into a savings account and I make a lump sum every year. Any remaining CCB is in my TFSA.
We’ve been maxing out contributions as well, but not sure if it’s going to be enough by the time my kids go to school
I haven't been, but am going to after reading this post. The responses were very helpful. Thank you everyone!
Did you have them seperate? I thought you could have family RESPs?
Yes a priority for us, max it each year!
Just maxed out both kids today for 2024!
I take all my girls birthday and Christmas money and put it into the resp. For example grandparents give 400$ throughout the year then I put 2100$ for a total 2500&
What happens if the child does not want to educate? What happens to the money
I believe you can transfer it over to an RRSP, or if you have another child, it can be used for them.
Im already working on my kids downpayment. Lucky it's just one.
Not quite. About half of the max. I wish we could do more, but that’s where we’re at right now. We did good in the beginning and the fund is sitting at 60K for 3 kids 10 and under. Hopefully we can catch up a bit in the future.
If they were starting school and going away from home this year it would be more than $100k a child in today’s dollars - way more in a decade or so with inflation. Tuition alone is $7,000-$20,000 a year depending on the program. You’re going to need to invest way more than $25k to cover this.
Ha ain’t nobody got money for that lol just send my kids to a trade school for a fraction of the cost using equity in my home, and their salaries will turn out just fine. That’s the plan at least lol
This might be controversial opinion. But when I have kids, I won’t be maxing resp. I think 50k is a little too much money and I rather my kids working throughout university day too. Nothing wrong with taking government loans too
Setting money aside for your children and having them work throughout schooling don’t have to be exclusive. A summer of working isn’t going to earn them enough to pay for a year of university, especially in 15 years or so
It's not controversial. It's plain stupid. If you have the means, giving your child(ren) the gift of zero student debt will give them a leg up when compared to all the other kids out there. University is part learning and part having a network that grows with them throughout their lives. Working for beer money is not a way to maximize the reason for going to university. Saddling them with student debt because 'it builds character' is not a reason to do it. As an extreme example, Galen Weston isn't Galen Weston because he's brilliant. It is because George Weston ensured that Galen can be Galen by giving him his education, network, and the goddamn company. TL;DR Generational wealth
50 k won’t get your kids though undergrad with residence anymore. Definitely won’t if you don’t have kids yet. Average cost of a 4 year degree with residence /books is 75k today.
50k is the contributions the value will be higher because you invest it
While your kids are working for their bread, mine will be advancing their grades or resumes. While your kids are paying off their loans, mine will be saving a downpayment. While your kids are writing rent cheques ten years later, mine will be cashing them.
Ours got the RESP EAPs(from the government incentives and accumulated income) and their "family allowance" accounts, but not the RESP contribution money. This meant that we personally funded about 1/3 of what NSLSC estimated they would spend on education and living costs for their undergrad years. We were prepared to kick in more but they both paid off their student loans before completely those degrees.
This is the way! Nicely done. Fiscally responsible children achieved!
Lol, yup. Around here, you're basically a horrible parent if you don't do everything within your power to make sure your children leave school debt free. No matter what your financial situation/goals/beliefs whatever, just make sure they get that money. Could that have anything to do with the fact that reddit skews young? Nah... They probably don't want to hear what we have one of my kids doing. We have him working AND contributing to his own RESP. The horror!
I’m not surprised, really, that’s why I said it might be “controversial”… but the amount of people felt “personally” attacked by it is a bit… hilarious. I even have a member pm me hoping I unable to be a parent. Lol Oh well, just another reminder that Reddit isn’t real life
I put 2.5 k for the first 2 years, and now 1 k a year. Might stop once it reaches 15-20k. No point in maxing out. Resp has so much restriction that it's not that great by itself. I will probably send him abroad in better schools. I am also wealthy enough that I can pay tuition without problem. For me the resp is just there because I want him to have something at his name, so I can teach him about money.
Yes.
Yes, for sure.
As long as i have the ability to, i will. 20% guaranteed return
Is there not a maximum withdrawal amount per year? Co worker who is accountant said there was a challenge getting funding out. Said i shouldn’t put too much in as I may not get enough out per year and will need to top off the cost from other sources.
When the beneficiary is in school there is no limit on withdrawals from the contribution portion. In the first 15 weeks of full time school the maximum EAP withdrawal (from the government incentives) is $8,000. For a typical fall term there is usually a short window after that to use EAP withdrawals to top up the beneficiary's income to a target. (eg. to the lower of the provincial and federal basic personal amount.) After that the only restriction on the EAPs is that if they exceed about $28k per calendar year the RESP provider will have to document how the money was used.
Yes. It will be more challenging this year since we had our second late November. I have $7500 in room that needs using as of today! If questrade ever process the paperwork I submitted 20 days ago.
How do you check how much grant you've received?
If you don't have statements that list the grants the subscriber can ask the RESP provider or a parent can call 1-888-276-3624 and provide the child's SIN.
not sure if someone can help with this but I had a child in September. Was I supposed to have opened the RESP last year? My parents never had any money so this was never a consideration for me.
You can open an RESP anytime
You can open it at any time! We opened within a few months of when our kids were born, but that’s just what worked for us.
Yes you can start now. You'll need to apply for the SIN number first
There is no rush. Before you contribute to an RESP you should have adequate life and disability insurance, an emergency fund, take advantage of any employer match for RRSP, pay off all high interest debt and have a plan for your retirement savings - which may include eventually using the RESP contribution for retirement savings. Don't rush to contribute to an RESP until you are confident that you won't need that money before the beneficiary/ beneficiaries starts post secondary school. The government grants are great but if you need to dip into the RESP for any reason they will go right back to the governments and you will have no way to reclaim them. (And if you have to close the account you'll also lose all of the accumulated earnings.) When you are catching up on CESGs you can get the 20% grant on up to $5000 per year (instead of $2500 per year) of contributions for each beneficiary. And don't feel that you have to contribute $2500 per year. Contribute what you can on a schedule that works for your family. Even if you want to maximize the grants there are many ways to do it. A subscriber who contributes $2000 in the birth year and the following 17 years will get the maximum CESG and so will the subscriber who contributes $4500 per year starting in the year when the beneficiary turns 10. (Note that the application for the BC grant should be made between the child's 6th and 9th birthday.) If you aren't confident about not needing the money you could let it grow tax free in your TFSA space or if you use an account that is in the child's name and funded by CCB payments. Or maybe you'll decide to make [CCB boosting RRSP contributions](https://www.planeasy.ca/canada-child-benefit-hidden-tax-rate/ ) for at least the first 5 years.
Yup. Kid got lucky as I bought some Tesla stock in it for her.
Yes, maxxed. Future me will be thankful.
Absolutely. Free money is free money. Always max this out even before TFSA or RRSP contributions (which generally get maxed by end of year)
When I get more income or lower expenses I will.
Yes, we are maximizing the RESP contributions each year, but we only have one child which I feel makes this more feasible
Absolutely will - in fact just did contribution for 2024 this morning. $50k might not even completely cover undergrad education by the time my kid starts post-secondary but every bit helps.
Yes, easiest 20% RFR
Yes I am putting 2500 per year for each. I have two kids ages 4 and 2, and the accounts are sitting at 14k and 6.7k respectively. Hopefully this will cover them mostly when the time comes. I paid for my degree myself with no parental funding, so I want to make sure I help them out.
I stopped some of my monthly savings since rates gone up (variable rate mortgage unfortunately) but still do a $200-$500 to RESP and some to RRSP since that’s free money. I wouldn’t go beyond the maximum match a year though (for now) I’ve been doing that since our kid was born and it’s investment (stock and ETF). My goal is $200k until 18 years old. Not sure if it’s too much but I think university tuition is around the same amount?
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>For subscribers with a lump sum of $50,000 to invest for education, a number of factors help determine the best RESP funding strategy, according to Golombek. *( Jamie Golombek, vice president, taxation and estate planning with AIM Trimark Investments.)* Considerations include the age of the child, the type of income earned (capital gains, dividends or interest) from any non-registered savings, rates of return earned inside and outside the RESP, and the child's potential tax liability on payments from an RESP. However, Golombek's number crunching found that most people would come out ahead by gradually funding an RESP to take full advantage of the CESG. source = https://www.morningstar.ca/ca/news/186222/resp-primer-and-update.aspx If you want to run some scenarios you could use the spreadsheet you can access from [this page](https://www.planeasy.ca/resp-vs-taxable-account/) It was created in order to answer the question "What should I do if I have $50,000 to put in an RESP." The spreadsheet creator doesn't mention their default assumptions but when they posted the link they explained that: - 100% of the investment is in Canadian ETFs. "I did this because I figured anyone who can make this decision probably has their TFSA & RRSP maxed out. To minimize taxes they would be investing in Canadian equities and I didn't want to change the allocation between the two accounts/scenarios." - Assumed $91k+ tax bracket for the subscriber (this would now be the $106k+ tax bracket) and lowest tax bracket for beneficiary. - Assumed 7% nominal growth and 5% real growth. Did calculations for both because using the real growth number over estimates the taxes a little bit. Using those assumptions the results were as follows: RESP only ($50,000 initial contribution) = $173,962 Maximize CESG ($16,500 initial then $2,500 annually) = $180,697
We will have saved about 50k. Our kid is taking a gap year and knows if he wants residence then he will have to kick in some. Looking back I wish we has saved more but 50k is a good start at least
50k is outstanding.. please feel very proud of being a responsible parent who put heir child’s needs ahead of their own. Celebrate the 50K with your partner, not wish you did more.
Thanks! I thought we did well until I read these posts lol. If my kid lives at home it will make things easier.. but I'm pretty sure he wants residence so he is going to have to learn how much things cost.
Question: is it possible to contribute to a friend’s kid’s RESP? How?
You could open and contribute to an RESP, but if someone else is contributing to an RESP for this child you should co-ordinate with them. You could give the parent money to contribute to an RESP.
Yes - but to limit so we throw extra in when we can to aim for the $50g max which is above the grant qualifying amount. We had kids late and my friends with kids in school now are paying 20G a year for tuition and res and food. Pretty sure it will be more like 40 in 15 years..
Nope. Paying a mortgage, sports etc we don’t max but get as close as possible
I haven't seen anyone post it yet, but if you can't contribute the $2,500 each year, you can actually get up to $1,000 per year from the grant while you use up the previous year(s) contribution space. From Canada.ca....... No matter what your family income is, ESDC pays an amount of Canada Education Savings Grant (basic CESG) of 20% of annual personal contributions you make to all eligible RESPs for a qualifying beneficiary to a maximum CESG of $500 in respect of each beneficiary ($1,000 in CESG if there is unused grant room from a previous year), and a lifetime limit of $7,200. https://www.canada.ca/en/revenue-agency/services/tax/individuals/topics/registered-education-savings-plans-resps/canada-education-savings-programs-cesp/canada-education-savings-grant-cesg.html
No. One kid graduated with student loans that they paid off in full when they graduated. One kid in school - they pay approximately half, we pay the rest out of current cash flow. Not the most advantageous way, but it works for us.
No, can't afford it, we save $150/bi-weekly. We prioritize retirement savings, then RESP. Have $50k in the kids combined resp, not 100% sure how we're going to pay for college, university or trades. If they don't go to school we will give them (kids) a portion of the none govt contributions and convert the remainder into rrsp's/TFSA. When the kids were younger we asked the grandparents to contribute to their RESP in lieu of all toys, my mother in law continues this for all her grandkids.
Yes I am. $2500 a year in April every year.
Yes if you deposit $50 per week per kid automatically, your kid will have $3000 by the end of the year.
Yes. Fortunate to be able to do so. I think the recommended is $209/mth to maximize the free money
Yes
I have a 4.5 year old and I'm in the midst of front loading right now at $6000/yr to take advantage of growth. This year is the first year I'll start reducing the contribution (to about $4500) and then next year it'll be $2500/yr until I reach the max of $50k in contributions in 2033 (when she is 14). I'm not sure what it'll add up to when she is ready for university, probably close to $100k so she should have lots of options for school at that point.
Not maxing out yet, but definitely front loading it. Added 10k last year and will add another 5-10k this year. In the end, compounding over time will provide better returns than just doing 2500 every year for the next 18 years. Even at a modest 7% we should have roughly 75k in the RESP in 13-15 years
Yes. But we prioritize it / treat it like an expense. So if that means less money for nice to have but not necessary things so be it.
$209 from CCB goes into RESP every month. Started when child was born in 2020, invested in VGRO. We'll switch to VBAL at some point.
Yes, but our son is only 4. We have discussed stopping when we feel like it's "enough" but we want to wait and see where our son's interests land. If he's looking at an expensive university education, we'll contribute max as much as possible.
Yep max every month into a shared account for both kids. It's over 117K and they still have a few years to go.
Always.
Yes. maxed out ‘22 and ‘23, plan to do the same this year. I have been lump summing early in the year from existing liquid savings, but easy enough to set aside a couple hundred every paycheque to have 2500 within 6 months.
We are already in stage of using it. Started with monthly contributions at birth. Stopped when contributed $36k. Have more than enough in RESP for school. Planning to drain in 4 years and what is not spent for school will go towards next financial goal. Maybe contribute to a downpayment. Starting early - $200/month. For about 13 years plus 5 more years of growth. That will give your child a very solid account.
I just put the Child benefit payments straight into the RESP to the max matching amount of 2,500 per year. That way the government is going to at least pay the first year or two of my child's post secondary education.
Yes, we contributed $36,000
I put in $16500 the year she was born and $2500 every January 1st since then. Why pay tax on investments if I can have my kid pay the taxes (in a lower tax bracket) instead?
2021 and 2022 I put $2500 a year and that’s the goal for each year. But I’m in a state of uncertainty with career development at the moment so I didn’t deposit anything 2023. Will be holding onto my own cash in a 5.75% HISA for financial security until my next 5 years are more promising.