Saving for your child’s education will likely improve the odds that she will participate in post-secondary education by diminishing financial barriers and building a financial nest egg.
~ Mike Holman
Whenever I was looking for detailed information about RESPs, I would always end up at Mike Holman’s blog. It used to be called Four Pillars, but the name has since changed to Money Smarts Blog. Mike’s always had a very comprehensive section on RESPs on his site and it was my go-to reference on the topic.
Still, I’m a huge fan of physical books rather than their cyberspace cousins and I wished I could have a concise book about RESPs on hand to use as a reference. It’s so easy to forget the details of relatively complex financial products like RESPs given that you likely don’t revisit them more than once or twice a year. I really like having Gordon Pape’s TFSA Guidearound for the same reason.
Mike Holman has done us all a favour by offering us The RESP Book: The Complete Guide to Registered Education Savings Plans for Canadians. He’s even taken it a step further by offering a free copy to one lucky Balance Junkie reader. All you have to do is leave a comment below and I’ll enter you in a draw for the book. I’ll announce the winner next Saturday, October 30, 2010 and Mike will send out the book. (Canadian residents only please.)
What’s In The RESP Book?
The RESP Book covers all the basics of opening and managing an RESP, including the following:
- RESP account rules
- How RESP contributions and grants work
- RESP withdrawal rules once your child attends a post-secondary institution
- What happens if your child doesn’t attend post-secondary school
- Special grants for lower income households
- Information about grants programs in Alberta and Quebec
- RESP rules for part-time studies
The book also offers detailed information on how to go about setting up an RESP account, from choosing a financial institution to whether or not to use a professional investment advisor. He goes over what to watch out for in terms of fees, as well as basic investing tips like how to set an asset allocation.
The book begins with a basic explanation of what an RESP is and offers 6 reasons why you might want to open an RESP, and 6 reasons you might not want to do so. I’ll just give you a couple of my favourites here. The best reason to open an RESP for your kids is likely the Canadian Education Savings Grant (CESG). You just can’t beat free money. Another good reason is the idea that your children will not leave their post-secondary education saddled with tons of debt.
A couple of good reasons to delay opening an RESP might be that your personal finances are not in order, or that you do not have adequate retirement savings. The message is clear: Get your own financial house in order before you set about helping your kids.
Details, Details . . .
At 118 pages, this book won’t take you long to read, but it’s absolutely full of detailed information that’s pretty hard to remember from year to year. It’s greatest value may lie in its usefulness as a reference manual. You can turn to it a couple of times a year to quickly refresh your memory on the ins and outs of saving for your child’s education.
My two older boys turned 15 this year, and I thought I remembered reading that 15 was a significant age for RESPs, but I couldn’t remember why. Mike’s book reminded me that there are special grant rules for 16- and 17-year-olds, and the parameters for those are determined by the RESP status at the end of the calendar year your child turns 15.
I could have found this information on the government’s website, but frankly, it’s not always written in an easy-to-understand way. The RESP Book is. There are lots of different examples and specific case studies so that you can really get a grip on how the RESP rules work.
Mike recommends keeping an eye on your time horizon and shifting to more conservative investments like bonds as your children grow up. His kids sound like they’re pretty young, but I can tell you from experience that the years flip by like calendar pages, and they do so with increasing velocity as your children grow. Just when it seems like you’ve got a handle on putting money into the RESP, it’s time to figure out how to get it out again!
Have you set up an RESP for your children?