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I think RESP’s are a brilliant idea, provided your children go on to post secondary education. Where else are you going to get an instant 20% on top of your investment for basically nothing? While I do think there is value in your kids having “skin in the game” so they don’t coast through school with no purpose, we’d also like to help out as much as possible so they don’t have to compromise on their education because of finances. Hey, if they get accepted into Harvard or Stanford, we’ll find a way to make it happen without creating a mountain of debt.
I’m not going to get into details about RESP’s, since there is a host of great info already out there, like Mike Holman’s Money Smart Blog. What I want to talk about is the conundrum of trying to come up with the scratch to contribute $2,500 for each of my two girls each year in order to take full advantage of the CESG. After paying for your basic necessities, mortgage, car, daycare, utilities, house/car/life insurance (I can go
on but will stop here), what’s left? What about other savings? I think the average DINK (double income no kids) these days has a hard enough time living paycheque to paycheque. Now add two little girls to the mix …
Now I know you don’t have to start contributing right away and can wait until the kids are older and hopefully don’t cost as much (no more diapers, childcare, etc.). But I’m a strong believer in starting early and using the power of compound growth. Plus people tend to get
caught in the “I’ll start later” trap and end up never getting to it, as there always seems to be something else. Granted I am writing this while Mrs. Popthoughts is still on maternity leave, so the reduced income only highlights the difficulty for us at the moment.
So despite telling you how hard it is, we’ve managed to find the means to sock some money away for the girls’ RESP’s, but it hasn’t been easy and we’ve used money that was gifted to them. How about the other parents out there? Do you feel your budget is as stretched as ours? Do you manage to put away enough for your kids’ education? If not, don’t stress, because you’re probably not alone.
The Canadian Government gives Universal Child Care (UCC) at $100 per kid per month. We end up putting this in a separate bank account for the kids, then use the money for their RESP. That’s just about half the amount at $1200 provided by the government, you’ll just need to come up with the rest of the $1300.
Glad to hear that you found a good chunk of that money in your UCC. For the other half, it just comes down to either reducing your expenses or increasing your income. Most of us live pretty wasteful lives. So I’d start with all the simple things you can do to save money. Analyze your budget and see where you can really save money. I’ve been finding that by reading lots of personal finance blogs, I’m finding all kinds of ways to get my finances improved.