How much in RESP?

Asset allocation, risk, diversification and rebalancing. Pros/cons of hiring a financial advisor. Seeking advice on your portfolio?
mlepage
Contributor
Contributor
Posts: 33
Joined: 14 Dec 2014 22:53

How much in RESP?

Post by mlepage »

Really, I suppose this question is asking, how much will education cost in the coming years?

I am assuming my children will go to university or college, in Canada, for 4 or 3 years, starting in 5.5 years. I am assuming costs are higher than when I was in university 20 years ago.

If I max out contributions, that's roughly $50K. And if invested, it should grow somewhat, so it will be more than that. Let's say it got to $75K through growth. Would that be enough to go to university reasonably?

Can students still get student loans like I did?

I have four kids, so maxing out all four may not be possible. Hence my interest in the question, how much is enough?

What if I did $35K per kid, plus some investment growth, is that enough?

How much will typical 4 years in university cost in the next 5-15 years, do we think?
User avatar
ghariton
Veteran Contributor
Veteran Contributor
Posts: 15954
Joined: 18 Feb 2005 18:59
Location: Ottawa

Re: How much in RESP?

Post by ghariton »

mlepage wrote:How much will typical 4 years in university cost in the next 5-15 years, do we think?
The answer depends on a number of factors. For example, will they be living at home while attending university? If not, triple the amount of money needed. Will they have summer jobs or other sources of remuneration? Will they be in a co-op program? And so on.

FWIW undergraduate tuition in Ontario is running at about $6000 to $7000 a year. Add in books and other stuff, and you are at $8000 to $9000 before you even cover housing and living expenses, so put down $20,000 to $25,000 a year. Adjust as needed in response to the questions I posed above.

Graduate school or professional studies are additional, and can easily add another $50,000 to $150,000.

So I would say you should put as much money into RESPs as you can reasonably afford, given your other expenses and objectives, and of course the limits of the program. You are unlikely to over-contribute.

George
The juice is worth the squeeze
mlepage
Contributor
Contributor
Posts: 33
Joined: 14 Dec 2014 22:53

Re: How much in RESP?

Post by mlepage »

I doubt they will be living at home. Even if they go to school in the same city, I don't live near the campuses. I suppose it's a remote possibility though.

I guess it sounds like the full $50K, plus growth, will be necessary.

What about student loans? I'm not necessarily desiring to pay for all their education, given I have twice the normal number of kids to do that for, and I don't want to overly neglect my retirement savings in favour of their education. I want to help, but not necessarily give a free ride. (And evidence suggests this is the best way to make financially successful offspring, anyways.)

Are student loans still available in this day and age? I finished university with about $25K of student loans, and paid it off over a number of years (I can't remember how much exactly, maybe 5-7). Maybe that's reasonable. If it's $25K per year, that's like requiring the student to pay for one year. I'm OK with that.
User avatar
kcowan
Veteran Contributor
Veteran Contributor
Posts: 16033
Joined: 18 Apr 2006 20:33
Location: Pacific latitude 20/49

Re: How much in RESP?

Post by kcowan »

I would contribute the maximum for the government match (Currently $2500/year) and invest it wisely. I think you will use all the proceeds.
For the fun of it...Keith
mlepage
Contributor
Contributor
Posts: 33
Joined: 14 Dec 2014 22:53

Re: How much in RESP?

Post by mlepage »

This article suggests about $17.8K per year at York, living away from home, and gives a cost breakdown.

http://www.thestar.com/business/persona ... _resp.html
mlepage
Contributor
Contributor
Posts: 33
Joined: 14 Dec 2014 22:53

Re: How much in RESP?

Post by mlepage »

This article says:
According to the University Cost Calculator at www.getsmarteraboutmoney.ca, an engineering student at the University of Toronto living away from home can expect to shell out $26,809 a year. That’s based on data from a 2012-2013 Statistics Canada survey
http://www.thestar.com/business/persona ... _pape.html
nisser
Veteran Contributor
Veteran Contributor
Posts: 2079
Joined: 11 Nov 2007 21:24

Re: How much in RESP?

Post by nisser »

Given that you have 4 children, it will be very difficult to fund the entire cost of their education (tuition, living costs, food, etc) so I think it'd be best to just set a goal of covering their tuition and leave part of the responsibility to them. They can definitely get student loans still.

Tuition cost is variable from province to province (and has been growing faster than inflation!), but a reasonable range is 6-7k/ year giving you a total cost of ~25,000 in today's money. As someone already mentioned I'd focus on investing the maximum amount at which the government is willing to match your donation. Even that is a hefty 10,000$ yearly bill if the maximum is 2500!
mlepage
Contributor
Contributor
Posts: 33
Joined: 14 Dec 2014 22:53

Re: How much in RESP?

Post by mlepage »

Yup, $10K per year, more if I get a few of the back years (which I have done). It is bank breaking labour. I still have 4 time $2K back years to do, but otherwise I have met the maximum. Also basically maxed my RRSP. But not really been filling TFSA or accelerating the mortgage, that is the consequence. I figure if I don't max the RESPs every year, at least I should get the earlier years, to allow for growth.
Pitboard
Contributor
Contributor
Posts: 100
Joined: 23 Oct 2013 18:05

Re: How much in RESP?

Post by Pitboard »

Do the kids have no responsibility for this cost?
Pushing kids through the system that should never be there is the modern way.
All those BA's working at the GAP and the like, does not make sense to me.
The loss of Grade 13 takes that extra year of sober second thought of what the future might hold for that child.
Marks are to easy to get in high school........just push them through. Let the next level deal with the mess.
Cream will always rise to the top. They are the ones that should filling the spaces.
Sorry I forgot higher education is just another business.
Keep funding your kids because they have grown up in this new world of "they must have it all."
Why should these kids have to worry about money and goals. We have it covered for them.

End of RANT
SQRT
Veteran Contributor
Veteran Contributor
Posts: 5441
Joined: 01 Nov 2012 11:33
Location: Ontario/Arizona

Re: How much in RESP?

Post by SQRT »

Pitboard wrote:Do the kids have no responsibility for this cost?
Pushing kids through the system that should never be there is the modern way.
All those BA's working at the GAP and the like, does not make sense to me.
The loss of Grade 13 takes that extra year of sober second thought of what the future might hold for that child.
Marks are to easy to get in high school........just push them through. Let the next level deal with the mess.
Cream will always rise to the top. They are the ones that should filling the spaces.
Sorry I forgot higher education is just another business.
Keep funding your kids because they have grown up in this new world of "they must have it all."
Why should these kids have to worry about money and goals. We have it covered for them.

End of RANT
Well, clearly some kids should not go to university but other educational options qualify for RESP's. Do you think all post secondary education is a waste? Certainly wasn't for me or my daughter. I funded 100% of her education and intend to fund 100% of any grandchildren as well. I can't think of a better legacy to pass on to your kids.

My father held the view you express in your "rant" and actively discouraged me getting a post secondary education. Took me quite a few years to convince him of the worth of education. He eventually acknowledged that he was indeed wrong.
Pitboard
Contributor
Contributor
Posts: 100
Joined: 23 Oct 2013 18:05

Re: How much in RESP?

Post by Pitboard »

Education is never a waste. We create that privileged attitude that has become prevalent in our modern society by providing so much. We don't want our kids to struggle like we might have done. That struggle made us who we are today, good or bad. Work ethic seems to me what is missing from a great number of the younger generation. Where dose that lack of work ethic come from??
SQRT
Veteran Contributor
Veteran Contributor
Posts: 5441
Joined: 01 Nov 2012 11:33
Location: Ontario/Arizona

Re: How much in RESP?

Post by SQRT »

Pitboard wrote:Education is never a waste. We create that privileged attitude that has become prevalent in our modern society by providing so much. We don't want our kids to struggle like we might have done. That struggle made us who we are today, good or bad. Work ethic seems to me what is missing from a great number of the younger generation. Where dose that lack of work ethic come from??
No idea. I haven't actually witnessed it in my daughter or nieces/nephews. I have every confidence that the future is in good hands. I think the value of "Struggle" is way overstated. Education has made me who I am today. If I can provide such, for the next generations, all the better.
Pitboard
Contributor
Contributor
Posts: 100
Joined: 23 Oct 2013 18:05

Re: How much in RESP?

Post by Pitboard »

Did your daughter contribute anything to the cost of her education?
mlepage
Contributor
Contributor
Posts: 33
Joined: 14 Dec 2014 22:53

Re: How much in RESP?

Post by mlepage »

In my case, my kids may very well pay part of the cost of their education. Certainly they will have to if the RESP is insufficient. Also, they are at or near the top of their classes, so no worries there. Myself, I was at the top of my class, benefitted immensely from university, and had to pay my own way, saddled with student loans. If I had education paid for me, I'd be further ahead and better able to provide for my children's education while also saving for retirement.
Flaccidsteele
Veteran Contributor
Veteran Contributor
Posts: 4523
Joined: 06 Mar 2014 12:52
Location: Retired Gen Xer somewhere on the planet earth

Re: How much in RESP?

Post by Flaccidsteele »

Pitboard wrote:Sorry I forgot higher education is just another business.
SQRT wrote:Do you think all post secondary education is a waste? Certainly wasn't for me or my daughter. I funded 100% of her education and intend to fund 100% of any grandchildren as well. I can't think of a better legacy to pass on to your kids.

My father held the view you express in your "rant" and actively discouraged me getting a post secondary education. Took me quite a few years to convince him of the worth of education. He eventually acknowledged that he was indeed wrong.
mlepage wrote:In my case, my kids may very well pay part of the cost of their education. Certainly they will have to if the RESP is insufficient. Also, they are at or near the top of their classes, so no worries there. Myself, I was at the top of my class, benefitted immensely from university, and had to pay my own way, saddled with student loans. If I had education paid for me, I'd be further ahead and better able to provide for my children's education while also saving for retirement.
I apologize in advance for going OT, but I couldn't help but notice the aforementioned comments about the value of post-secondary "higher" education.

Only speaking for myself, I feel that a post-secondary education is only necessary to "check off the box" in order to get one's foot in the door of an employer. Outside of this, I see no value in post-secondary education. My parents would disagree.

It is important to keep in mind that my goal was never to find a 'fulfilling job' or 'lifetime employment' or anything of that sort. Everybody has different goals. As it should be.

However, once I determined that a post-secondary education wasn't correlated with financial security (i.e. defined by myself as not needing an employer's salary to provide for my living expenses), I lost interest in the value of post-secondary education.

I recognize that a post-secondary education is correlated with income. However, the income associated with various post-secondary degrees is uninteresting to me because, aside from being the source of seed capital, I determined that, after a few years of compounding, income would soon become inconsequential in helping me achieve financial security.

This may seem incongruent with my establishing an RESP for my child, however, as I mentioned above, I don't know what my child's goals will be. Nobody can assume a shared point of view when talking about a child. But if the RESP is needed/wanted, at least it will be there.

Again, my apologies for going OT. Now back to your original programming...
SQRT
Veteran Contributor
Veteran Contributor
Posts: 5441
Joined: 01 Nov 2012 11:33
Location: Ontario/Arizona

Re: How much in RESP?

Post by SQRT »

Pitboard wrote:Did your daughter contribute anything to the cost of her education?
She contributed a lot: study, effort, time, a great attitude. I paid for virtually all the monetary cost.

Incidently, my education played a very direct role in any success I might have had. I would not have been able to get the fantastic job I did without my educational credentials. The knowledge I learned(especially getting my CA) was absolutely necessary in my career.
Pitboard
Contributor
Contributor
Posts: 100
Joined: 23 Oct 2013 18:05

Re: How much in RESP?

Post by Pitboard »

A huge amount of those RESP funds are spent on general degree's, taking years of just filling in time trying to figure out where they are going in life.
They graduate and wake up to the realization that 3 years spent at university does not get them to the front of any job line.
There are lots of kids that have a goal picked out and are working hard to get there. They are the ones that deserve the help from the RESP program BUT they should shoulder some of that cost from their summer and even during the school year jobs. Today's parents don't seem to push that concept. They are more concerned about being able to say "I gave them a good education"
Instead of pushing kids to get that general degree parents should be helping their children discover what career might fit who THEY are. It's a bit like the dad who thinks his son will play in the NHL and pushes the kid to the point that he hates hockey.
They have lived with these kids for 17 years you must have notice something that gets them excited. Should that not be a starting point of a career discussion.
User avatar
kcowan
Veteran Contributor
Veteran Contributor
Posts: 16033
Joined: 18 Apr 2006 20:33
Location: Pacific latitude 20/49

Re: How much in RESP?

Post by kcowan »

My kids worked to finance their educations. In fact, one was making $55k/year at The Keg part-time when Rogers offered him a starting position for $36k. He arranged to keep The Keg part-time for a few years while he worked at Rogers. Paid off his new car and got the down payment for his house.

At $50K maximum RESP per child for a 4+ year education, there is no doubt that they will have to contribute. How they do that is a personal choice.
For the fun of it...Keith
SQRT
Veteran Contributor
Veteran Contributor
Posts: 5441
Joined: 01 Nov 2012 11:33
Location: Ontario/Arizona

Re: How much in RESP?

Post by SQRT »

It is such a personal thing. I don 't think sweeping generalizations add much to the discussion. Each kid is different and how/if they get an education really depends on their abilities, personalities, and many other variables. I was happy to provide the resources and would certainly do it again. Others of course are free to do otherwise and I would not presume to give them advice.
Pitboard
Contributor
Contributor
Posts: 100
Joined: 23 Oct 2013 18:05

Re: How much in RESP?

Post by Pitboard »

SQRT how did you fund your education?
THEMAINEVENT
Contributor
Contributor
Posts: 154
Joined: 31 Aug 2010 10:10

Re: How much in RESP?

Post by THEMAINEVENT »

My kids should each have close to $100k in the RESP since I have been contributing $2500 annually each starting the month of their births. Over $60k combined now and they are only 7 and 5. That being said I plan on never revealing this number and making sure they have some skin the game. Summer and part time jobs and perhaps some student loans so they appreciate the monetary burden of an education. If they do well in school I would prefer to pay off the debt when they graduate or have some money aside for a car or home down payment when they start their careers.

My parents offered to pay 100% of my education and it wasn't a good thing for me. I was lazy and spent more time playing poker and getting drunk than attending classes. Didn't take long for me to start failing classes and I ended up being kicked out. That is when my parents cut me off and my real education began (working a minimum wage job with no help from mommy and daddy).
Flaccidsteele
Veteran Contributor
Veteran Contributor
Posts: 4523
Joined: 06 Mar 2014 12:52
Location: Retired Gen Xer somewhere on the planet earth

Re: How much in RESP?

Post by Flaccidsteele »

Although we have veered OT, I have found tremendous value in these last few posts. I just wanted to highlight some of them.
Pitboard wrote:A huge amount of those RESP funds are spent on general degree's, taking years of just filling in time trying to figure out where they are going in life. They graduate and wake up to the realization that 3 years spent at university does not get them to the front of any job line.
In general I would agree with this.
Pitboard wrote:Today's parents don't seem to push that concept. They are more concerned about being able to say "I gave them a good education"
I never thought about this aspect, but I can see this. It helps explain some of the parents who seem to bring this up without my prompting.
Pitboard wrote:Instead of pushing kids to get that general degree parents should be helping their children discover what career might fit who THEY are. It's a bit like the dad who thinks his son will play in the NHL and pushes the kid to the point that he hates hockey.
Although I agree with this concept. I think that it's difficult to do. Children will not necessarily adhere to the same biases as the parent. Regardless of parental indoctrination. Sooner or later there will be rebellion. It requires a lot of introspection and communication on parts of both parties to avoid this one.
Pitboard wrote:They have lived with these kids for 17 years you must have notice something that gets them excited. Should that not be a starting point of a career discussion.
True. In an ideal world. However, bias is a double edged sword. It can blind and it can't enlighten. Time, in and of itself, doesn't resolve differing biases between two individuals.
SQRT wrote:It is such a personal thing. I don't think sweeping generalizations add much to the discussion. Each kid is different and how/if they get an education really depends on their abilities, personalities, and many other variables. I was happy to provide the resources and would certainly do it again. Others of course are free to do otherwise and I would not presume to give them advice.
I think that this is fair. When speaking about one's children, I think it's important to preface all opinions with this idea. I'm looking to improve in this aspect. But at least I recognize the problem.
THEMAINEVENT wrote:My parents offered to pay 100% of my education and it wasn't a good thing for me. I was lazy and spent more time playing poker and getting drunk than attending classes. Didn't take long for me to start failing classes and I ended up being kicked out. That is when my parents cut me off and my real education began (working a minimum wage job with no help from mommy and daddy).
This is a good story. I was of a similar personality. Money isn't a scalpel. It's more akin to a blunt instrument. Use with caution.
SQRT
Veteran Contributor
Veteran Contributor
Posts: 5441
Joined: 01 Nov 2012 11:33
Location: Ontario/Arizona

Re: How much in RESP?

Post by SQRT »

Pitboard wrote:SQRT how did you fund your education?
I funded it myself. All my post secondary education was part time and I had a full time job throughout. Took me about 10 years to get a BA, CA, and MBA. Completed when I was 29. My employer paid for some of my MBA tuition. It was awful, but I was determined. Not sure this would even be possible today but would be much more expensive if it was. My parents weren't in a position to help with the cost, and in any event as I said up thread, my father thought post secondary education was a waste of time and money. I don't believe I value my education any more because of how it was funded and I certainly don't believe how I funded it changed me for the better. I really could have used some help.
SQRT
Veteran Contributor
Veteran Contributor
Posts: 5441
Joined: 01 Nov 2012 11:33
Location: Ontario/Arizona

Re: How much in RESP?

Post by SQRT »

THEMAINEVENT wrote:
My parents offered to pay 100% of my education and it wasn't a good thing for me. I was lazy and spent more time playing poker and getting drunk than attending classes. Didn't take long for me to start failing classes and I ended up being kicked out. That is when my parents cut me off and my real education began (working a minimum wage job with no help from mommy and daddy).
Do you think the fact your parents funded your education made you lazy? Or were you lazy anyway and needed to mature a bit before getting serious about your education? This was my case as the first couple of years I wasn't doing very well even though I was funding myself. Took a threat of suspension for me to smarten up.
As I said before each person is different
mlepage
Contributor
Contributor
Posts: 33
Joined: 14 Dec 2014 22:53

Re: How much in RESP?

Post by mlepage »

Myself I did 4 years BCom then 2 years BSci for 6 years of university. First 3 years I stayed at relatives, so saved a lot on rent. My parents did not have money to pay for tuition books etc., I just got a little bit now and then. I got maybe $1-2K of bursary/grants. The rest was student loans. Plus I worked for a year or two, literally, in a fast food joint on evenings and weekends.

After graduation, I owed just over $25K in student loans, which took me years to pay off. I'd have preferred to not start out owing that money, then I could have started saving more earlier. And now I have 4 kids to save for, so saving for retirement or paying off the mortgage is more difficult. It keeps me slaved to my job which I'm not totally happy with.

In retrospect, I should have stayed just the first year in residence, despite the additional cost. It would have given me a better experience. Also, although the minimum wage job helped, it would have been better to use that time for more study or even just enjoying university. I didn't have that super great university experience that everyone seems to talk about, for me it was just study and some work. Actually, ideally, I would have had some sort of office job, but I didn't know how to get one back then. I'm hoping to offer more of that sort of advice to my kids: by all means work, but find a job worth working, in the grand scheme of things.
Post Reply