Mike Holman from MoneySmartsBlog.Com is one of the most respected financial bloggers in the industry and when it comes to RESP’s, Mike literally wrote the book on the subject.

The RESP Book takes a comprehensive look at how RESP accounts work, including how to get one started, what kind of investments to buy, and how to withdraw the money when (or if) your child goes on to post secondary school.  I enjoyed Mike’s straight-talk approach to the often complex topic of RESP’s.  The chapters were easily digestible and each contained a helpful summary to capture and restate the key points.

A few weeks ago I had the opportunity to interview Mike Holman about The RESP Book and about RESP’s in general:

Why did you decide to write The RESP Book?

I had already written quite a bit of RESP material on my blog, and my former blog partner (Mr. Cheap) actually encouraged me to write a book.  After learning enough about how simple and inexpensive the actual self publishing process was, I got the idea that this might be a practical thing to do.  I wouldn’t have to sell that many copies to make a success out of it.

Also, there were no other RESP books or resources on the market in Canada, which helped get some publicity when the book launched.  The reaction wasn’t just, “oh, here’s another RESP book”, it was the only RESP book.

The rules around RESP contributions and withdrawals are complex.  What’s the one thing parents need to understand about RESP’s?

If I had to name just one thing I’d say to make sure you understand the rules, especially on the withdrawal phase.  There are areas you can get caught-up where you might end up paying more taxes or have to give grants back, or not maximizing the amount of money you get out of your account if you make a mistake.  The RESP is not rocket science but it’s definitely a level above the RRSP and TFSA in terms of complexity.

It even seems like the banks and their representatives are often confused when it comes to RESP rules.  What do you make of that?

I get emails quite frequently regarding RESP’s and some of them involve conflicts with employees at financial institutions who basically don’t know the rules.  It’s pretty common.  But financial institutions might have people who are fairly new and they don’t just need to understand RESP accounts they need to know all types of accounts as well.

There’s definitely more contributing than withdrawing going on, so maybe some employees haven’t had to deal with the withdrawal phase as much, although RESP’s in their current form have been around since 1998 and employees of financial institutions are under obligations to know the rules, and they should.

In the book you recommend using TD E-Series Funds.  Why is that?

For somebody who wants to take a do-it-yourself approach, I think the TD E-Series funds are the easiest and cheapest way to do passive investing within your RESP account.  That applies to non-RESP accounts as well.

Should parents set that up right away, or wait until they’ve contributed a certain amount?

From a hassle point of view you might want to wait until you have at least $1,000 to make it worthwhile to set up the account and make the appropriate asset allocations.  But if you’re going to buy index funds, typically people will set up a monthly contribution so even if you don’t put much money in the beginning you can set up a monthly contribution for $50 or so and then go from there.

Most young families can’t afford to max out their RESP contributions to take advantage of the extra grants (CESG).  What approach should they take with their contributions?

In my opinion, before you make RESP contributions your finances should be in decent shape.  Which is not to say they have to be perfect but if you really don’t have much money, or you have credit card debt I think you should address those issues first.  If you’re spending more than you make, RESP contributions should not be a top priority.

But if you are in a position where you want to get going, I think even starting with a small amount like $50 a month will help quite a bit.  Every little bit counts.  You might get to a point later on where you’re not a young family anymore and maybe your mortgage is paid off and at that point you can increase your contributions a lot.

Is there time to catch up?

You can catch up basically one year of contributions each year.  For example if you haven’t contributed for the first five years, the following five years you can double your maximum contributions (assuming you have the money), so you could put in $5,000 and get $1,000 worth of grants and use up your unused contribution room.  What you can’t do is contribute $20,000 in one year to try and get the grants from the previous 5 years.  Once your child reaches the age of 10 then you start to run out of time if you want to catch up and max out the grants.

You recently released an e-book about how to withdraw money from your RESP account.  Why did you focus on the withdrawal phase?

One theory I have is that people in the withdrawal phase might be less inclined to buy an entire book because they know they won’t have a use for most of it.  But considering the book only cost $20, including delivery charges, it probably shouldn’t matter, but still I understand that concern.  I just wanted to see if doing a smaller, more specific book would appeal to people in that phase of the RESP account.

Final Thoughts

I’d like to thank Mike for taking the time to chat with me about The RESP Book.  This book is an excellent resource for Canadians, and if you have an RESP or are thinking about starting one, you need to have this guide on your bookshelf to help you through each phase of the account.

 

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41 Comments

  1. Sustainable PF on October 17, 2011 at 7:04 am

    Follow you via RSS (daily in the reader), and on Twitter. Not sure about Facebook, please check 🙂

    Having just introduced lil’ SPF to the world 2.5 weeks ago I really do need to learn about RESPs pronto!

  2. trina on October 17, 2011 at 8:17 am

    I’d love to win a copy of this book! Already subscribe by email.

  3. Michael C on October 17, 2011 at 8:26 am

    I would love a copy of this book. I have 3 young children (6 & under), want to make sure I am doing things right.

  4. Lyne on October 17, 2011 at 9:16 am

    Thanks for the opportunity!

    Already subscribed by RSS 🙂

  5. Kevin R on October 17, 2011 at 9:42 am

    Love to win a copy… I have done the Facebook, Twitter and RSS links…

    Thanks…

  6. SophieW on October 17, 2011 at 3:39 pm

    I’m an email subscriber… look forward to your posts every day! 🙂

  7. Be'en on October 17, 2011 at 11:06 pm

    Would love to read this book! Thanks.

  8. Caroline Hanna on October 18, 2011 at 6:04 pm

    Just found your blog and liked you on facebook! Look forward to reading more posts…
    carehanna.blogspot.com

  9. nicole aben on October 18, 2011 at 8:27 pm

    I have just started to look into RESPs, this book sounds perfect!

  10. Chris on October 19, 2011 at 6:02 am

    Sign me up for the giveaway 🙂

  11. Gabriel Chow on October 19, 2011 at 7:14 am

    I definitely would like to win this, with the way the economy is right now and the uncertainty of the future, having the knowledge to save for the kids would definitely be a big help… count me in!

    Gabriel C – zoococontest@gmail.com

  12. Gabriel Chow on October 19, 2011 at 7:15 am

    Have liked on Facebook – under Gabriel Chow

  13. Gabriel Chow on October 19, 2011 at 7:15 am

    Am following on Twitter – under gtychow

  14. Gabriel Chow on October 19, 2011 at 7:16 am

    Am following on RSS feed – under my email

  15. Renee Verret on October 19, 2011 at 7:27 am

    Just found you guys through Mike Holman’s article – sign me up for the giveaway 🙂

  16. Rajib on October 19, 2011 at 7:28 am

    Would love a copy of this book. I’m now an email subscriber!

  17. Jeff Delion on October 19, 2011 at 8:47 am

    Hoping to win! Love the blog.

  18. Johan G on October 19, 2011 at 9:01 am

    Thanks for the write up! I read about Mike’s book on the Globe and Mail a while back. It’s on my to read list! Maybe I’ll win it. 🙂

  19. Julie on October 19, 2011 at 9:12 am

    Always looking for ways to save the for the kiddos, definitely want to read the book. Sign me up for the free one 🙂

  20. RIchard Ferron on October 19, 2011 at 9:13 am

    With two baby’s, that could prove useful!

  21. Elliot on October 19, 2011 at 10:05 am

    Hope to win the RESP book! Thanks.

  22. amy on October 19, 2011 at 10:36 am

    Winning the book would be great

  23. Tony on October 19, 2011 at 11:30 am

    would like to check out this book 🙂

  24. Kevin on October 19, 2011 at 12:04 pm

    As a relative new parent, I would love to get a copy of the book

  25. Winnie on October 19, 2011 at 12:49 pm

    Would love to win a complimentary copy to learn more about RESPs as we have 2 children to fund education for. Thanks for the first chapter!

  26. ig on October 19, 2011 at 1:19 pm

    My daughter is 1 month old. I would really like a copy of the book. 🙂

  27. the Paperboy on October 19, 2011 at 2:49 pm

    Great interview! Hopefully I can win the book and learn more!

  28. TS on October 19, 2011 at 3:22 pm

    My god-daughter is three months old… I know her parents would love it if I could win this book for them!

  29. sean pynaert on October 19, 2011 at 6:02 pm

    please enter me

  30. lucy kabatoff on October 19, 2011 at 6:09 pm

    I would really love to read this book.

  31. Amy Decordova on October 19, 2011 at 6:47 pm

    Looks like a great read!

  32. Stephan on October 19, 2011 at 6:52 pm

    Great, send the book over here please !

  33. Angelika M on October 19, 2011 at 6:53 pm

    I would love to win this book! I’ve already subscribed to your newsletter.

  34. Bugz on October 19, 2011 at 8:14 pm

    This would be an awesome book to win!!

  35. Michel on October 19, 2011 at 9:15 pm

    I have read on RESP, including lots of financial vendor brochures. Just reading extracts of the RESP book that I received periodically showed me that what I know on RESP is barely the tip of the iceberg. This book should be a masterpiece of information.

  36. Rosalie Banal on October 20, 2011 at 8:46 am

    Awesome book…i would love to have a copy. I have two sons ages 10 and 11 🙂 More power and God bless!

  37. Very Personal Finance Blogger on October 21, 2011 at 5:13 am

    I’m a late contributor, aiming for a $10,000 contribution by the end of this calendar year for my two children, aged 7 and 10. I live in Quebec, where there is an additional grant that, confusingly, is only available from certain financial institutions, and, in the case of TD, only available from TD Waterhouse. I am grateful to Mike Holman for his RESP information. Honestly, the government should pay him for it!

  38. zoe on October 21, 2011 at 7:50 am

    Would love to win the book. With 4 kids under 6, I have a lot to learn!

  39. mike strathdee on October 21, 2011 at 4:07 pm

    Great article. thanks for this

  40. Dylan on October 27, 2011 at 1:33 pm

    Sure – we just had our first, so this book would get us started nicely. Thanks for the great article/interview.

  41. Karen Parkins on February 22, 2012 at 5:59 am

    Looking forward to reading this book on only RESP’s. Would love to win a copy. Thanks.

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