Three quick RESP pointers. Share with grandparents!

Three quick RESP pointers. Share with grandparents!!!

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Geez, I’ve been getting a lot of “What the hecks” from viewers because I haven’t touched much on RESPs in the videos yet. Hey, sorry, but RESPs haven’t been top of mind as my kids are old. In fact, they’re even older than I am. And I don’t have grandkids yet. But, okay, I’ll do a bunch of stuff on RESPs starting with this video. Here are three quick points —

good ones. 1. You know, the group RESPs sometimes called pooled plans? No, I’ve never liked them, never thought they were the best alternative for people. I won’t get into the weeds too much here. It’s a little bit boring, but I believe it’s best to go with an individual or family-plan RESP from a low-cost provider. The group’s plans fees have, I admit in some cases, come down, but often are still too high.

The plans aren’t flexible enough. And some of the group’s plans rules are really confusing if you leave early, again… 2. Love the family RESP account. Why? Convenience — you’re only managing one account, you’re only monitoring one account. Flexibility — this one is big. If one child doesn’t pursue a post-secondary education, the other child or children can use the income/growth and contributions.

Maybe even the CESG, (the government grant) if he/she/they aren’t at the $7,200 limit. Obviously, all this maximizes the odds the RESP dollars get used effectively. Now if you’re for sure only going to have one child, then an individual RESP, obviously, makes sense. Also, sometimes with blended families, parents opt to go with multiple individual RESPs because there’s different parents and grandparents involved, etc.

Again, makes sense. 3. We, the industry and the government, have done a very poor job of letting people know they can catch up on missed CESG government grants. Many of you are aware of the basic rule here: The government matches 20% of the first $2,500 you contribute per year per child. It could be $500 in free money.

But far fewer seem to know the catch-up rules. If you miss a year, or a bunch of years, or in some years contribute less than the $2,500, the unused grant dollars carry forward. You’re allowed to catch up one year at a time — meaning you can receive up to $1,000 in CESG per child in a single calendar year.

Now, you still do have the lifetime max of $7,200 in grants per child to deal with, of course. An example: You miss two years of contributing. So, the next two, you contribute $5,000 for the child each year — and voila, you get $1,000 a year in CESG and you’re caught up. Lots of people don’t realize that.

Now there are some special rules around CESG for kids 15 to 17, but you’ll have to look those up online as I’m starving and I’m going to A&W now. By the way, yes, I recognize that if it’s tough to save $2,500 one year, it could be near impossible to save $5,000 the next especially with the cost of living right now.

But for those who can, remember the catch-up rules, oh, and grandparents.