I already wrote a post on why I am NOT saving for my son’s future education but I didn’t mention the most crucial part:
He’s going to start saving (right now before he even turns 1) for his own education.
He’ll have a net worth at 18 that is far greater than I ever had at his age, and it’ll all be thanks to his own income.
Well in Canada we get a lot of monetary benefits for having children, and all of the money that we parents receive because we have a child, will go into his Registered Education Savings Plan (RESP). Here’s the short list of what could apply to him, as we live in Quebec:
- Canada Child Benefit (CCB) – Monthly amount until he’s 18 (federal)
- Régie des rentes du Québec Child Assistance – Monthly amount until he’s 18 (provincial)
- Universal Childcare Benefit – Monthly amount until he is 6 (federal)
- Quebec Education Savings Initiative – Yearly amount until he is 18 (provincial)
- Canada Education Savings Grant – Yearly amount until he is 17 (federal)
For low-income families (under $25,000 – $43,000 give or take):
- National Child Benefit Supplement (included in the CCB)
- Additional Canada Education Savings Grant (included under the CESG)
- Canada Learning Bond
BUT ISN’T THAT MONEY FOR THE PARENTS?
Yeah it is. It’s meant to cover the cost of having a child and to help subsidize Baby Bun’s expenses, but … we don’t really need the money.
We also didn’t have a child to make money.
The way I see it, if we didn’t have him, we wouldn’t have the money… so technically it’s HIS money, not ours
SO WHEN DOES HE START?
ASAP. The best time to get started is in his first year (compounding interest matters!), and every single dollar that comes from any or all of the programs above for him, will go straight into his RESP. We won’t be contributing any of our own money, it’ll all be his.
We’re already collecting cheques for some of the programs above, so that money is ready to be deposited into his account.
My really rough estimate of the entire amounts above if I were to be eligible to collect the absolute maximum for him for ALL the programs?
$125,000… give or take over 18 years*
*not assuming any growth or compounding interest, which is in addition to the $125,000, but then again it’s all based on my income; how much he gets. Yep.
Baby Bun will have a pretty healthy education fund, and that amount should be enough to cover 4 years at university or whatever he decides to do.
If he decides to not go to school at all, we’ll just take the money deposited on his behalf and get taxed on the earnings upon the capital but not on the capital itself (it has already been taxed), and give him the money for what he needs.
It’ll be his money. It’s just that Mommy and Daddy will be the ones helping administer the fund to let it grow over 18 years and to be ready for him.
I DO HAVE A SMALL PROBLEM THOUGH..!
And it’s a good one to have… but I will have too much money to put into his RESP.
Before you suggest putting it into my TFSAs or RRSPs, I am also maxed out on my retirement fund contributions as well, so there’s no room there.
In fact, he should only be contributing about $278 maximum a month or a bit less, to reach the $50,000 lifetime maximum in the RESP in 15 years (this is when I will be able to maximize and get 100% of all the grant money offered).
What do I do with the remaining cash?
I might have to open another account or something that’s separate from this, maybe a margin account under TD Canada Trust, and put it into e-series funds so that I don’t mix his money with mine.