Weekend Reading: More RESP Clean Up Edition

A few months ago I wrote about some changes I plan to make to our kids’ RESP portfolio. We’ve used TD’s e-Series funds for this account, but will switch to an ETF portfolio using Justin Bender’s excellent RESP strategy.

Along with this portfolio reboot, I’ll also change how we fund the account (annually versus monthly). But I’m afraid I’ve lost track of their total contributions and grants after many years of benign neglect automatic monthly contributions.

I called the Canada Education Savings Program hotline at 1-888-276-3624 and requested a Statement of Account for each child (note, you have to ask for this to be mailed otherwise the agent will just read the numbers to you over the phone).

Once I had the total contributions and grants per child, I calculated each child’s share of the investment returns:

I knew right away there was a problem. Our goal is to contribute $36,000 per child to attract the maximum CESG of $7,200 per child. But if we continue regular monthly contributions of $208.33 per child then our oldest is going to be short. By the end of the year in which she turns 17 we’ll have only contributed $34,125. 

This makes sense because while we opened the RESP right after our oldest child was born, we did not contribute the maximum annual amount. We started with what we could afford, which was $50 per month. That gradually increased to $208.33 per month – but that took a few years.

We’re going to have to catch up on a missing grant by contributing $5,000 in January, 2024. That, plus a regular $2,500 contribution in 2025 and a contribution of $1,875 in 2026 will fully max out the CESG for our oldest child.

Meanwhile, we’re right on track to contribute $36,000 by the time our youngest child is 16. We’ll do annual contributions of $2,500 from 2024 to 2027, and then contribute $1,400 in 2028 (her age 16 year) to fully max out the CESG for our youngest child.

The lesson here for those of you who did not max out your RESP contributions in the first few years is to get that Statement of Account for each child so you know exactly where you stand today, and so you can make a plan to catch up on the unused grants before it’s too late.

According to the Government of Canada website, beneficiaries qualify for a grant on the contributions made on their behalf up to the end of the calendar year in which they turn 17 years of age.

This Week’s Recap:

Earlier this month I wrote about when life insurance is sold, not bought. Still fuming about that one…

A reminder that the Canadian Financial Summit is back for its seventh year with a great line-up of speakers.

This year’s conference takes place from October 18th to 21st. You can grab your free ticket here.

Promo of the Week:

Maybe you’re ready to plan your revenge travel year in 2024, or you’re just looking to switch up a stale credit card rewards program and get into something more lucrative. 

My pro tip is to use Aeroplan for your flights and Marriott Bonvoy for your hotel rewards. The best way to accumulate Aeroplan miles and Bonvoy points is to collect American Express Membership rewards points.

Here’s my card line-up to get you started:

• The American Express Platinum card – Earn up to 100,000 Membership Rewards points.
• The American Express Aeroplan Reserve card – Earn up to Aeroplan points.
• The American Express Cobalt card – Earn up to 30,000 Membership Rewards points and 5x points on food and drink (this is my main every day credit card).
• The Marriott Bonvoy American Express card – Earn up to 55,000 Marriott Bonvoy points and a free night certificate.

And, for small business owners, even more lucrative rewards await:

• The Business Platinum Card from American Express – Earn up to 120,000 Membership Rewards points.
• The Marriott Bonvoy Business American Express card – Earn up 55,000 Marriott Bonvoy points and a free night certificate.

We’ve got an unbelievable trip lined up for next summer in England, France, Switzerland, and Italy. I’ll share more about that in a future post!

Weekend Reading:

The Globe and Mail’s Erica Alini says Canadians can expect to spend $350,000 to raise a child from birth to 17. I believe it.

Michael Lewis is under fire for taking it easy on Sam Bankman-Fried, the subject of his new book. Here’s where Lewis went wrong. 

Why cash ETFs deliver great yields at this moment, but they are no long-term substitutes for classic fixed income funds.

PWL Capital advisors Dan Bortolotti and Justin Bender share a better way to compare bonds and GICs. Excellent analysis.

A must-watch video from Dr. Preet Banerjee on AI and voice cloning technology. Scary stuff!

Many financial advisers only work with wealthy clients. So where are the masses going for help? (hint: contact me).

Mark McGrath with a great explanation of the retirement torpedo – sequence of returns risk.

Jason Heath says these tips can help you avoid financial pain amid the emotions of losing a spouse.

Finally, Rob Carrick asks why is this retiree having so much trouble finding a financial planner to help him draw on his savings tax-efficiently? (subscribers).

Have a great weekend, everyone!