Author Topic: Looking for (Canadian Education) RESP advice  (Read 1452 times)

techwiz

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Looking for (Canadian Education) RESP advice
« on: April 01, 2016, 07:59:28 AM »
Hi,

Just wanted to get some opinions on my RESP Plan. Was using a BMO mutual fund but recently transferred to a self-directed BMO Investorline to get away from the high fees and have the ability to invest in ETF's.

Current RESP family plan two kids (10 and 13 years old) has $85,000 currently all in cash.

My plan was to go with a model portfolio from Canadian couch potato.

Assertive (Model)
Vanguard Canadian Aggregate Bond Index ETF VAB 40%
Vanguard FTSE Canada All Cap Index ETF VCN  20%
Vanguard U.S. Total Market Index ETF VUN  20%
iShares Core MSCI EAFE IMI Index ETF XEF 16%
iShares Core MSCI Emerging Markets IMI Index ETF XEC 4%

My significant other is questioning if we should be holding more secure investments since the time frame is shorter than a retirement plan.

Any thoughts or advice.

Thanks,

 
« Last Edit: April 01, 2016, 08:09:51 AM by techwiz »

elaine amj

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Re: Looking for (Canadian Education) RESP advice
« Reply #1 on: April 01, 2016, 12:29:11 PM »
Following :)

I went with the balanced couch potato. There is the shorter timeframe to consider as my kids are in their teens.

Bytowner

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Re: Looking for (Canadian Education) RESP advice
« Reply #2 on: April 01, 2016, 01:35:08 PM »
I have mine in an assertive TD e-series CCP portfolio... but my kids are 3 and 1. At 13 I would be starting to move into something low risk.

Tawcan

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Re: Looking for (Canadian Education) RESP advice
« Reply #3 on: April 01, 2016, 02:31:48 PM »
We went with Vanguard model for our 1st kid, VCE, VTI, VXUS, ZRE and VSB. Only 5% bond right now as he's only 2. The bond percentage will slowly increase as he gets older. I do like the newer 3 ETF Vanguard model portfolio as it's even simpler and you don't need to deal with US currency.

techwiz

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Re: Looking for (Canadian Education) RESP advice
« Reply #4 on: April 01, 2016, 03:33:34 PM »
The low risk at withdrawal time is a common theme and I have been thinking about it a lot as I am trying to make up my mind.

However, the low risk options really don't even cover inflation these days. Even with one child at 13 they will only start drawing from the RESP in 4-5 years and will like draw for 3-4 years which makes it a 7-9 year investment timeframe.  Longer timeframe for the younger one. I could just change the asset allocation just keep increasing the percentage of bonds each year but then my return is likely to be reduced.
 
I guess it is really all about the amount of risk you a comfortable with.  If the market does tank for multiple years it could really affect how much the children would have. If this is the case I would have the choice to supplement with additional non-RESP money, but on the plus side if I get an average of 9% they would have enough money to attend a good university.

My RESP Plan is contribute to ensure I get the maximum $7,200 in grant money for each child.
That works out to contributing $2500/year per child which will give $500 grant money until the child is 14. In the 15th year I will only putting in $1000 to get the final $200 in grant money.

I am hoping that with capital gains and return on investment will turn this $42,200 into the amount required to attend college or university.
They say it will cost $100,000 to attend university ,but I figure that is the banks trying to scare us into saving more in there high fee mutual funds.  I was doing just that for the past 12 years until I started reading websites like MMM. The rate of return was under 5% and I was paying MER fees averaging 2.5%.

To turn this $42,200 into the 100k I am looking for 9% return.     
   



 

Bytowner

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Re: Looking for (Canadian Education) RESP advice
« Reply #5 on: April 02, 2016, 02:22:57 PM »
Yeah, if you're talking about the study that I think you're talking about, it had the cost at $95k in adjusted dollars for a student living away from home, $69k for someone staying home. That includes some absolutely silly numbers for living expenses and "non-education related" expenses.

I'm contributing the max, but I'm not going to stress out about reaching that $100k. No reason for my kids to expect me to pay for their entire degree.

elaine amj

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Looking for (Canadian Education) RESP advice
« Reply #6 on: April 02, 2016, 11:38:53 PM »
Does your $42k include the grant money? The grant really does make maxing RESPs super worthwhile.

I also warned my kids that I will pay for tuition at a basic university (if there is enough RESP money. Otherwise, they just get what's there). If they want anything more expensive, they can convince me it's worth it or pay the difference. They will be responsible for their living expenses (even if they stay home).

I am investing the max but will expect them to give me any extra money (since I will not be encouraging an expensive school). We chose to invest the max as extra investments for ourselves and have explained it to the kids. I will either use that for myself (or more likely for future big gifts to them like help with wedding/down payment).

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« Last Edit: April 02, 2016, 11:44:19 PM by elaine amj »

techwiz

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Re: Looking for (Canadian Education) RESP advice
« Reply #7 on: April 07, 2016, 11:44:11 AM »
Does your $42k include the grant money? I think I made a mistake it should be $43,200 which does include the $7,200 grant moneyThe grant really does make maxing RESPs super worthwhile.

I also warned my kids that I will pay for tuition at a basic university (if there is enough RESP money. Otherwise, they just get what's there).My thinking as well but if I can turn this amount of money into more with some risk I am thinking it is worth taking that risk If they want anything more expensive, they can convince me it's worth it or pay the difference. They will be responsible for their living expenses (even if they stay home).

I am investing the max but will expect them to give me any extra money (since I will not be encouraging an expensive school). We chose to invest the max as extra investments for ourselves and have explained it to the kids. I will either use that for myself (or more likely for future big gifts to them like help with wedding/down payment).

Sent from my iPhone using Tapatalk