Planning for Post-Secondary

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  As a former educator, married to an educator, our children’s education is something we discuss and think about quite often. Having worked in the public system where my husband still works, we are very focused on finding a way to afford either home schooling or private school. While that decision is pretty imminent, we also focus far into the future and on post-secondary options.

Both of us had Registered Education Savings Plans (RESP) started and funded by our parents. At the time, the only option was group plans that offered little flexibility and were quite rigid. In the end, both of us and our siblings’ RESP savings took a hit from the group plan as there were large numbers of students in the years we went to school, with little growth in our plans. Furthermore, one of my husband’s siblings did not attend post-secondary and the plan his family had invested in refused to pay back the principal or transfer the amount to my husband, thus causing them to lose out on thousands of dollars. Things have certainly changed with the increase of competition, nevertheless, we were quite wary of using a group plan.

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We actually started investigating and ultimately investing in my little guy’s post-secondary education when I was just 5 months pregnant with him! In the end, we found a private investment company with low rates to work with. We also decided to go with a private plan. We did mainly did this as it makes us feel more in control of the funds and we don’t have to worry about splitting dividends.

Now many of you savvy readers likely know that you can’t actually open a RESP until after your child is born and you have received his/her social insurance number (in Ontario at least). So what we did was open a Tax Free Savings Account (TFSA) and put $100 biweekly into it. Monkey was born in July and his social insurance number came in September and by October we had $2500 in the TFSA to transfer to the RESP from the money we added and interest (we had started saving in March). Every other week, $100 is added to the TFSA and when the account reaches $2500 we transfer the funds over to the RESP. You may be wondering why we transfer the money to the RESP at $2500 – the reason is because the government gives you $500 once you reach that amount, but you don’t get any extra afterwards. We also continue to put the money in the TFSA so we would have some cushion to start baby #2’s plan. The other reason we choose to add money to a TFSA and then transfer it at $2500 is because the government grants top off at $7200, so after we reach that amount, there is little benefit of paying into a RESP rather than a TFSA where the money is freely accessible at any time.

So that’s our RESP plan. With raising tutition amounts and overall cost of living, we are fully aware of the fact that the RESP will not meet our children’s financial needs (heck it didn’t even cover ours as I still worked full time and had to take out loans), but every little bit helps!

How are you saving for your child’s education?

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