Quote:
Originally Posted by V
We have an RESP setup for our first kid, but have regretted it for quite some time. Haven't set anything up for the other 3.
My investments do much better than the RESP has performed, and we don't really miss the extra 500 bucks the gov't throws in. Honestly, I don't even know if I'm going to pay for my kid's tuition. It's so cheap here, and it really hasn't risen that much in the 13 years I've been out of school. I don't see university being prohibitively expensive 15 years from now, regardless of what those salesmen would like to tell you.
|
I am in the middle. I throw a few $K per kid into the RESP each year, but university in Canada is so cheap that I am not too worried about it. Plus with three kids, I am saving essentially with the view that 2/3 will need the full tuition. If all 3 need it, then I will have to buck up a bit, but for $5-6K a year in tuition and books (current, obviously) that's not very much in the grand scheme of what kids cost, yet people fixate on it like it's a $100K bill you need to prepare for.
I understand the 20% return, but you folks are not accounting for the downside risk to that free 20%: If a kid doesn't go, you lose it! And there is a huge tax disadvantage to RESPS versus using a TFSA, etc for example. It's NOT a tax deducible investment for you AND it's taxable when it comes out to the kid. Some people mistakenly say "so what? My kid won't pay taxes" but he'll have to use some of the tuition tax credits they get to offset the income, and they could have transferred those to you or saved them up.
Basically - the RESP is a good forced savings mechanism, but it's not the silver bullet many think it is. There is significant tax disadvantages and lost opportunity if the kid doesn't use it (I know there are lots of ways to access it, vocational schools, etc)
Coles notes: I use the RESP but do not maximize it, but supplement it with other investment strategies as the benefit of the RESP is really only the free gov't money, but if the kid doesn't go, you lose all that and have a double taxation issue.