To be honest, I haven’t done much research on RESPs and how they work because I don’t have a kid, but I have always been meaning to look it up to see what all the fuss is about. Another reason why I have always wanted to check out RESPs is because I plan to (hope to) have a child within the next four years or so.
Thank goodness Mike over at Money Smarts Blog wrote the book: The RESP Book: The Complete Guide to RESPs for Canadians, because I was given the opportunity to learn the ins and outs of the “RESP”, that elusive and often misunderstood registered account.
It is so well written, clear, no fuss, no fluff, no beating-around-the-bush and such a breath of fresh air. It’s so easy to read I read it in 1.5 hours on a flight to Hawaii. I had so many “ah-ha!” moments, I think my BF sitting beside me was getting annoyed with my mini-epiphanies.
It is so easy to read and so well-laid out that it will work as a fantastic reference book, basically like an RESP for Dummies (Not sure if they have an RESP for Dummies, but this book is so good and easy to read..).
I learned a plethora of things about the RESP- it really is so comprehensive and complete (yet written very clearly and simply without any wasted words) that it IS the ultimate “complete guide” to RESPs for Canadians. It even has a handy dandy summary at the end of the book, and a checklist for you to keep track of the steps needed to open up an RESP for your child. It even tells you step-by-step what options you have if your child decides to go the “screw education” route so that you avoid the harsh penalties and taxes if you withdraw the funds.
I knew that the government would match or top up some of your contributions to the RESP, but I didn’t know how much and under what circumstances.
Mike Holman also throws in some goodies at the end, including information about proper asset allocation and some basic explanations of investments you can hold in the RESP, including an explanation of stocks, mutual funds, index funds, ETF’s etc.
Here are ten things I have learned about the RESP thanks to this fantastasmic book:
- The government gives your beneficiary a 20% grant to the contribution you put out (up to a max of $7200– that’s almost $10K!! Free money from the government!!)
- ANYONE can open an RESP (which I had no idea…I thought it had to only be for children), but it can become a moot point if you are over 17 (and you’ll find out why if you read the book)
- I had no idea that the hospitals have these RESP hawk-like prowling sales people/pamphlets that try to sell you their RESP products… evil!
- You don’t need to use the RESP ONLY for tuition. It can be anything PF related
- I now know what to watch out for (over-contributions, too LATE contributions etc.)
- That if you start contributing to your RESP for your child too late, you’re basically SOL (you’ll learn how late is “late” in the book)
- I learned that you can use the RESP for part-time studies too, but there comes with criteria for this
- If you have a lower net income, the government will give you even MORE money (huzzah!!)
- I also learned the reason why the RESP is so elusive and why you don’t see RESP accounts advertised in banks or in the media as much as RRSPs (note: and it’s not because it’s any less sexy)
- Most importantly, I also learned that the Canadian government actually isn’t as bad as I had thought it was. That they DO try and encourage you to save as much as possible (what with RRSPs, TFSAs, RESPs) and reward you if you exhibit good money hoarding behaviour
So now I come well prepared with this arsenal of information about the RESP and will make sure I follow all the tips and tricks in the book once that baby of mine pops out (in the next few years). From day 0, I’ll make sure he or she is well equipped and will have access to money for school (because being $40K in debt when you graduate from post-secondary just seems like it sucks).
I honestly think EVERYONE with a child or thinking of having a child should go out and get this book and start contributing to an RESP. Giving a child the chance for higher education and not having to limit their opportunities because of money is the best gift to possibly give, IMHO. I was given this gift by my parents (and scholarships thanks to my genius intellect lol) and am sure glad I didn’t have to go into debt for school. Besides, if the government is giving away free money, why not take advantage of this rare opportunity?