I have a 4 yr old boy and 2 yr old girl.I want to open RESP accounts for both.
I don't have much knowledge about which one to go with.I met someone who works for CET and this this what she has recommended.Dear CD's I need your advise to choose the right plan for my children.
She said there are institutes who do RESP's:
1.BANKS :
a)GIC :The growth you get is very very low.
b)Mutual Funds:Risky and you have to be on top always.Also there is MER fee which is 2-3%
2.Ins Companies
a)Global :Not recognised by Govt.So if company fails, Govt is not going to support you.
b)Heritage
c)CST
d)CET
e)USC
She said out of these CET has the max growth in last 13 yrs.
You get Saving+Govt Grant+Growth
The advantage of CET is that you get is for example you have to get $50,000 for your child's study.Most co's will give you $20,000 in the 1st year and then $10,000 each year for next 3 years.And just in case your child not go for all 4 yrs you loose that amount.But with CET you can take 3rd and 4th years grant in 2nd year minus the interest.
Also your child gets insurance.
Now, I need guidance from experienced CD's in letting me know if this info is correct and is there any better RESP than this that I should go for?
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Posted on: 17-11-09 13:46:06
A lot of info is available online on RESP. As with most investments, past performance is not an indication of future performance. So, I'd suggest besides receiving opinions, do your own research. You might unearth a lot that might fit your investment taste. I'd be wary of anyone suggesting past growth as a model for the future.
I have my child's RESP through a mutual fund. My argument in favor of mutual fund:
* RESP is a long term investment, hence MF is one way to invest without being overly concerned about short-term drops and gains.
* Mutual funds don't need daily monitoring, you have professional management (hence, of course, the associated fee)
* There are zillion mutual fund options that would let you diversify and invest in something that fits your risk tolerance.
Depending on how aggressive of a mutual fund investment you go for, you'll receive good growth plus Govt grant (CESG) plus of course your own out of pocket investment.
As I understand based on recent conversation, the CESG is deposited in your RESP based on child's birth year. For instance, I recently opened a RESP for my 3 yr old. I found that CESG deposit was made by the Govt for both 2009 and 2008.
Also, note you can open multiple RESP accounts for the same child. So, if you feel one investment is too risky, you can always have, say, one in GIC, one in mutual fund and one in Insurance related product (as long you don't violate the $ limits of the RESP).
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Dimple2001
Quote:
Originally posted by cool girl
I don't have much knowledge about which one to go with.I met someone who works for CET and this this what she has recommended.
You need to spend more time understanding how the different options work.
Meeting with one salesperson from one company is not enough.
For most people, locked in and high fee options like CET, USC, CST, etc. do not work well.
Quote:Compared to what?
1.BANKS :
a)GIC :The growth you get is very very low.
I would say compared to a 50% drop in equity markets, the growth is awesome!
It is also CDIC insured.
The Govt. grant automatically provides 20% gains on your investment (subject to a max limit), therefore, the risk you need to take on in your investments should be lower.
The type of investments you choose for a particular type of account needs to factor in the purpose of the account and the time frame.
Don't just go returns chasing.
Quote:More garbage from salesperson pushing their own agenda.
b)Mutual Funds:Risky and you have to be on top always.Also there is MER fee which is 2-3%
Very few retail mutual funds charge 3% MER.
Most funds are in the range of 1.5% - 2.5%.
Anything over 2% is usually specialized, high volatile sectors, like emerging markets, BRIC, small cap, materials, etc.
You shouldn't be investing in those for RESP anyway.
Most balanced, bond, income or straight equity funds are in the 1% range.
You could aso buy ETFs, index funds or eSeries mutual funds that mirror broad indexes.
MERs are usually less than <1% (some as low as 0.25%).
Quote:Why do you need segregated funds?
2.Ins Companies
Quote:So all of these are specialized, pool based RESP companies.
a)Global :Not recognised by Govt.So if company fails, Govt is not going to support you.
b)Heritage
c)CST
d)CET
e)USC
They follow the tontine scheme model.
Their model is characterized by long lock in periods, committed contributions, high fees and penalties.
Quote:Of course....and who does she work for, again?
She said out of these CET has the max growth in last 13 yrs.
Quote:You get that everywhere.
You get Saving+Govt Grant+Growth
Quote:You need to research more about the different types of investment vehicles.
Now, I need guidance from experienced CD's in letting me know if this info is correct and is there any better RESP than this that I should go for?
In particular, look into index funds, ETFs, self-directed RESP plans and straight bank accounts with a mix of GICs and low-cost mutual funds.
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Excellent response, dimple2001. Great information provided. Thank you.
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Madan Chartered Accountant team
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