RESP: Scams & How to Invest Your RESP! [Even with no/low income] - PSA and Discussion Thread

[Will continually update/upgrade/refine post, here's a first stab]:

What are Registered Education Savings Plans (RESP)s ?

-a way for you (subscriber) to save a child's (beneficiary)'s education with tax-free GROWTH while INSIDE the account
-you can open them for kids that are not yours like a niece/nephew/grandchildren/other non-blood related)
-can be opened as an individual account (for any kid) or a family account (here you need to be blood related)
-many children can dip into the same family account - useful if there is attrition in beneficiaries for whatever reason
-$50,000 lifetime contribution max, $2500 contribution per year nets $500 (typical max) from the gov per YEAR
-the typical max $500 kickback from the Federal Government is called the CESG (Canadian Education Savings Grant)
-additional money received if you're low income, BC and QC enjoy additional provincial grants
-CESG only goes up to 17 years, for a lifetime maximum of $7200 in grants, a total of $36,000 will be 20% [Fed] matched
-if you miss a year, you can make up for 1 year in the past in any given year (so $5000 for a $1000 kickback)

-if you want to collect ALL possible CESG, you MUST start the RESP for the child before age 10

-money placed into RESP is not tax-deductible nor a credit, it is not like an RRSP, but more similar (but not the same) as a TFSA
-money grows tax free while inside the RESP, then is disbursed on education when the beneficiary is in school
-if you're child does not go to school, the penalties can be onerous (20% penalty tax on investment gains), can only be mitigated by rolling it back into your RRSP (if you have room), all CESG must be forfeit back to government, non-contribution withdrawals from RESP will be taxed in the hands of the child upon disbursement

-Advanced: no treaty for foreign dividend tax immunity from USA (just like TFSA, but unlike RRSP)

More reading:
Federal Government: https://www.canada.ca/en/services/benef ... /resp.html
Taxtips.ca: https://www.taxtips.ca/resp-registered- ... s-plan.htm
Ontario Securities & Exchange Commission: https://www.getsmarteraboutmoney.ca/inv ... ans/resps/

-RESPs can be savings accounts, GICs, treasuries, stocks, stock ETFs, bonds, bond ETFs, REITs etc.
-In my case [ext. family], I would load the $2500 on Jan 1 (dump it in ETFs), and I would get the $500 CESG around Feb - March, then dump the $500 into same ETFs with a commission-free ($0) broker (2 transactions/year - adds up if you pay $10 each)
-RESPs can be held at banks, discount brokers, insurance companies, fund/asset management companies, and the institution type described below which should be avoided:

WARNING!!!

Obligatory RESP PSA: Stay away from those scholarship funds, unless you like losing $3000-$5000 on an exit fee once you realized you've made a mistake

If you fell into these traps, I do not know how to un-quagmire that situation. Some of these companies will have people break the law to get your maternity data to sell these financial landmines to you:
Hospital staff, financial reps charged in patient RESP scheme
https://www.thestar.com/news/crime/2015 ... cheme.html

Read up on the shady financial practices here (example I found in seconds):
GROUP, POOLED, AND SCHOLARSHIP TRUST RESP: YOU SHOULD AVOID THEM
https://www.genymoney.ca/group-pooled-s ... rust-resp/

Group/Scholarship/Pooled Scholarship Trusts mentioned above (and below):
***Heritage Education Funds/ Knowledge First Financial (this is Canada’s largest Group RESP dealer)
Canadian Scholarship Trust (CST) Fund
Child Education Fund
Global Education Trust Plan
Children’s Education Fund Inc.

***Looks like Heritage was acquired by Knowledge First Financial:
They thought they were saving for their kids’ education but were shocked to learn their money was gone
https://www.thestar.com/news/investigat ... -gone.html

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Low to no income: The Canadian Learning Bond ($2000 free):

If you are low-income, don't sweat it, you can get some free money for an RESP to compound early ($500 upfront + opening fees, $100 for each of the 15 subsequent years for total of $2000 in free cash). Figure out how it'll affect your OSAP/financial plans though:
https://www.canada.ca/en/employment-soc ... -bond.html

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How to Invest Your RESP:
https://www.canadianportfoliomanagerblo ... your-resp/

For those of you who do not like reading (I certainly don't, if you can't tell by my grammar):


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The Above too Advanced?

If the above is too difficult, consider creating a Questrade account (if not in BC/QC - then check if you get QESI/BCTESG). In Ontario, we get nothing other than the Federal CESG anyway.

This is an example of how to use a broker interface, they're all pretty similar. Requires Grade 5-8 math:



PWL Capital (who the dude in the video works for) published this RESP whitepaper guide back in the day (2014). One tl;dr conclusion is to grab a 60% stock / 40% bond portfolio and call it a day - XBAL/VBAL/ZBAL etc etc. This is the easiest implementation. They took the whitepaper down, but it's been archived, it's at odds with the stock tapering strategy above:
https://web.archive.org/web/20210303224 ... linked.pdf

If you want a simple intro to investing in general:
https://corporate.vanguard.com/content/ ... %20(1).pdf

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Discount Brokerages

Everyone should have a discount broker. Someone can correct me if I'm wrong there...If you want somewhere to start, check your local bank's discount brokerage division (Desjardin Disnat, National Bank Direct Brokerage, Scotia iTrade, BMO InvestorLine, TD Direct Investing, CIBC Investor's Edge, and RBC Direct Investing. I use Questrade (no ETF buy commission + no minimum account balances for those < $10-25k sitting around) as well, but I am unsure how it will handle additional province-level grants - they will still beat those scholarship funds. Your bank will likely want to shove you into their mutual funds at exorbitant 2.5% MERs once you ask, which will still outperform and scam you less than the group/scholarship funds.

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Extra provincial grants

Extra provincial grants (make sure your bank/broker can accept these before you establish your account):
https://www.canada.ca/en/services/benef ... ncial.html

My god times are tight, I remember way more provinces offering these historically, now it's just BC/QC + SASK (maybe?) This country just keeps getting worse and worse over time!

British Columbia

To help, the B.C. Government will contribute $1,200 to eligible children through the B.C. Training and Education Savings Grant (BCTESG).
https://www.canada.ca/en/services/benef ... ncial.html

La Nation du Québec also has the QESI (for some reason revenue Canada didn't want to list this above)

Voici la liste des promoteurs de régimes enregistrés d'épargne-études (REEE) qui offrent l'incitatif québécois à l'épargne-études (IQEE). Les REEE qu'ils offrent sont admissibles à l'IQEE.
Français: https://www.revenuquebec.ca/fr/citoyens ... s-de-reee/
Anglais: https://www.revenuquebec.ca/en/citizens ... providers/

Saskatchewan
Being wound down:
https://www.saskatchewan.ca/SAGES

The Saskatchewan Advantage Grant for Education Savings (SAGES) program has been suspended as of January 1, 2018, and is being wound down. SAGES grants will be converted to earnings and will continue to be paid out as part of an Educational Assistance Payment (EAP) to an eligible beneficiary who is enrolled in a qualifying educational program at a designated post-secondary institution.

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FULL-LIST OF ALL RESP PROMOTERS/PROVIDERS IN CANADA, INCLUDING NEFARIOUS FUNDS - provincial grants listed

https://www.canada.ca/en/employment-soc ... -list.html

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Estate Planning with RESP

While there is a beneficiary, for some reason, the money doesn't actually go to the beneficiary when you die. Instead, it egregiously goes to your estate and will be subject to estate taxes. To avoid taxes you will want to include your RESP in your will. If you're a Torontonian, you can get a free template from the library. Something is better than nothing. People usually recommend going to a lawyer.

https://libbyapp.com/library/toronto/ex ... depot/card
https://extras.overdrive.com/toronto/lawdepot

Another free source: https://www.canadawills.com/

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I put this in parents because this will have more impact here than Personal Finance/Investing.

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Disclosure:
-This presentation references an opinion and is for informational, educational, and entertainment
purposes only. It is not intended to be investment advice. Seek a duly licensed professional for
investment advice. I am not a finance or tax professional.
-While the information provided is believed to be accurate, it may include errors or inaccuracies.
-The author/presenter is not liable for any loss caused, whether due to negligence or otherwise
arising from the use of, or reliance on, the information provided directly or indirectly, by use of
this post/thread.