R.E.S.P .etc

No, that’s not a typo and I wasn’t trying to sing the “R-E-S-P-E-C-T” song. Back in January, before I left for Hong Kong, I opened up a Registered Education Savings Plan (RESP) for my two youngest brothers. I don’t want them to take a student loan from the government because it’s too expensive and I didn’t want my parents to have to worry about extra savings. I have a bit of extra money at the end of the month so I decided to do the savings for them.

Tonee and Kevin are 16 and 12, respectively and it won’t be long before they’re done with high school. Tonee has two more years before he’s done and Kevin will be done high school around 2015. I can make deposits into Tonee’s account for two years and Kevin’s for seven years. The amount in Tonee’s account isn’t going to be that high since it’s such a short period of time but it should be enough to get him started. Kevin is the youngest and always gets spoiled and it looks like he’ll get spoiled again.

I’ve decided to make monthly deposits of $100 per account. I’ve set up an automatic withdraw to deduct $50 from my account every other week and deposit it into each RESP account. At the moment I have an RBC Target 2010 Education Fund and an RBC Target 2015 Education Fund.

I’ve decided to go conservative with Tonee’s Target 2010 because I don’t want the money to fluctuate too much. When it comes to money, the less time you have, the less of a change you want. I don’t want to put this portfolio into a higher risk category and end up having nothing by the time Tonee graduates. Tonee’s account is at $655.22, a positive gain of $5.22 which isn’t bad. Maybe he can use that extra $5 to buy a pencil case or something.

Somewhere down the road, I decided to top up the account to $500. I was informed by the account manager that if I have more than $500 in the account, I could start making deposits myself but as it turns out, I can’t deposit anything into this account unless I call in. It had something to do with mutual funds and securities. Every now and then I would like to deposit an extra $25 into each account and I thought it was a waste of time having to call in and ask someone at RBC to do it. But if that’s what the rules are, I don’t have a choice but to follow it.

Kevin’s account is more aggressive than Tonee’s because I have more time to save. His account is up at $663.57 which is $8.35 more than Tonee. The cost of Kevin’s portfolio is a tad more than Tonee so he’s getting fewer units. By the time Kevin starts college, he should have about $8400 in this account whereas Tonee will only have about $2400. That’s probably enough to cover a semester or so.

On top of my monthly deposits, the government gives me a 20% grant. For every month that I deposit $100, they will deposit $20 into each account. At least, that’s what I thought it was but after looking at the history, it looks like I’m only getting 15%. I don’t know if it was changed somewhere during the years but it’s better than nothing.

If you have kids, I highly recommend that you start an RESP for them as soon as possible. I tell my friends who has kids to do the same but they’re not doing it. It doesn’t matter if you can’t put $100 a month away as long as you put something in there, it will help. A deposit as low as $20 a month from the day they were born until the day they graduate will save you about $4000. You can either use that $4000 to pay for part of the tuition or take a loan from the government and worry about paying the interest on the loan.

3 replies on “R.E.S.P .etc”

  1. @Will: Thanks! I’m hoping it’ll give them a little head start when the time comes.

    @Carole: I have a lot of time to read stuff every now and then… and when you work in an office environment, people tell you tidbits here and there.. bonus!

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