Good bright-and-early morning to you!
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After a weird night of dreams (a common occurrence lately….), I found myself up far too early, stressing about our stupid (stupid, stupid, STUPID) RESP accounts. Grrr! I have been stressing about this for weeks now, trying to figure out how to keep from losing the over-$3000 we have saved with a certain RESP company.
See, when we moved, for some reason their mail was not properly forwarded to us. And in the chaos of switching banks, I somehow neglected to notice that their monthly contribution was missed (bad Meaghan, I know…). So for 5 months, they did not receive our direct deposit into the bugz’ RESP accounts.
Fast-forward to the end of February, when I receive a bundle of correspondence from the company, stating that we are past-due and our accounts will be terminated. Along with the various letters were two that contained termination cheques for about $350 each. This was all that was left over from over $1500 in deposits per child, after they take their enrollment fee.
GAH!!
So I’ve sent online secure messages. I’ve tried several times in the past month to contact our sales rep. I’ve called the customer service line NUMEROUS times, only to find out I’m #25 in line, and that my wait time is approximately 30 minutes. I don’t know about you guys, but I don’t have 30 minutes to sit on hold in this house, clutching a piece of paper.
Finally, my anxiety reached its peak this morning, and I looked at the clock. 6am local time meant 8am Eastern time, so I hopped out of bed and dialed into the customer service centre. Lo and behold, I did not have to wait on hold, and was blessed with a VERY helpful lady who reinstated our plans and told me every little step needed to get our money back into the account. PHEW. She also took a couple minutes and prepared the necessary paperwork to send out today, while I was on the phone.
I really, really, sincerely appreciated that.
But it all leads down the path that I know now to be true: RESPs are NOT the best choice for your childrens’ education savings. They seem great, and the reps are sooo good at getting at you while you’re freshly postpartum, sleep-deprived and confused. But here’s a little breakdown for you:
PROS:
*familiar-ish concept (much like RRSPs … a story for another day)
*widely advertised and available from all banks
*government grants (up to $7200!)
*tax-deferred growth
CONS:
*must be used for accredited post-secondary studies before the 25th birthday
*withdrawals are fully taxed as income
*cannot be used for non-accredited programs – basically, if you can’t qualify for a government student loan for the program, an RESP will not qualify for withdrawal either
*if you do not use it for post-secondary studies, or by the 25th birthday, you lose ALL the interest, ALL the government grants, and the fees paid. You will ONLY get your principle deposit back. Zero growth, minus fees
*if your child does not go to school, you’ve spent 18 years making 0%
There are a lot of other options that are more productive and allow for many more options for your child’s future. Don’t get sucked in to the first shiny offer – ask around and talk to people about other ways to save. Think of it this way:
What if you spent 18 years saving towards your child’s future and they couldn’t use the money to follow their dreams? What if they wanted to open their own business, or buy their first home? Wouldn’t it be nice if they could use their savings to THEIR best interest? Not every child will go to post-secondary, but it doesn’t mean that you shouldn’t still be saving for them. It’s more important to have options on their 18th birthday, rather than having them feel obligated to go to school so that your hard-saved money isn’t wasted.
PS, just so y’all know, I’ve been spelling “withdrawal” wrong for YEARS. This post changed my life 
