Choosing your RESP Before Baby’s Arrival
December 3, 2018
Here we are: I am now officially a mom… and the subscriber of an RESP. In my previous article, A Baby, an RESP, I told you that investing early is the best way to get the most out of your RESP. Well, I took my own advice!
Think about it before you become busy
I was told more than once that a newborn would change my family’s routine. Luckily, I chose to be the old fable’s ant and not the grasshopper! I did my homework in the last few weeks of calm before the storm (I mean…this amazing human being) came into my life. I took advantage of the expertise of Kaleido’s scholarship plan representatives to get all the information I needed, ask my questions and, finally, choose the RESP that was the right fit for MY needs. This way, when my little storm was born, all I had to do to was send his social insurance number, and everything else was taken care of for me.
Maximize your investment
Even though I won’t get there the first year, I haven’t lost sight of my objective to contribute $2,500 in my child’s RESP every year to fetch all grant money offered―after all we’re talking about a 30% increase on the first $2,500 contributed annually.1
As for the years I don’t reach this goal, I’ll always have the possibility of recovering unclaimed grant amounts. As soon as my child was born, he was “entitled” to a certain amount of grants from the government; now all we have to do is go and get them! At least I know that if I don’t contribute the maximum to baby’s RESP this year, I’ll be able to recover the unclaimed grants later on. Read up about it!
My ant strategy
My husband and I came up with our own strategy: we each opened a plan for our child and contribute $83 monthly, per plan.2 Spread over 12 months, this sum seems realistic enough for us. At this speed, we’ll have contributed around $1,000 each by the end of the year, for a total of $2,000!
Of course, ultimately, we want to reach the $2,500 maximum to attract at least $750 in grant money ($500 in CESG and $250 in QESI) for our child’s future education.1 As an ant, I don’t want to pass up on the $750 (and sometimes more!) offered by the government every year. But still, we didn’t want to be overwhelmed by our monthly contributions, so we decided to limit ourselves to this amount.
As for the remaining $500, we decided to make single contributions throughout the year; this might require a little more discipline, but we’ve got the motivation. Either you’re an ant or you’re not! We’ll start by making additional contributions on Christmas and on baby’s birthday. Two gifts less to wrap, and that’s another $100 in our RESPs! We also talked about the advantages of RESPs with our families and I’m pretty sure grandpa, grandma and aunt Jess will choose RESP contributions to gift as well! Last but not least: we will also put our tax refunds to work in our plans. These amounts are never included in our family budget, so they make for the perfect additional contributions!
Of course, to each their own strategy. To me, it’s important that we take advantage of this opportunity as Canadians and get as much grant money as we can by investing in an RESP. And remember that realistic objectives, with which you are comfortable, really make a difference.
So, are you a grasshopper or an ant?
1. The Canada Education Savings Grant (CESG) rate is 20% to 40% and the Quebec Education Savings Incentive (QESI), offered to Quebec residents only, is 10% to 20% based on adjusted family net income. The annual limits are set at $600 for the CESG and $300 for the QESI, while the lifetime limits per beneficiary are set at $7,200 for the CESG and $3,600 for the QESI. CLB: The Canada Learning Bond is up to $2,000 per beneficiary and is offered for children born after December 31, 2003, and whose families meet the financial criteria. Certain conditions apply. Refer to our prospectus.
2. This amount is case scenario and does not necessarily correspond to all budgets.