You just had a new born Baby, a fantastic, exciting moment. You’re on top of the world, but its short lived, as scary thoughts creep in and now you suddenly realize that you are responsible for this life for the next 20+ years.
Relax, you’re only responsible until they become an adult (depending on where you live this could be as early as their 18th birthday), but you’ll most likely be paying for them far, far beyond that.
Right about
now 2 things are probably happening;
1) Regardless if you are still at the hospital, or in the
parking lot about to leave, or back home already, someone that sells Registered
Education Savings Plans (RESP’s) is knocking someone else over (that also sells
them) to get to you first, and
2) You are most likely only days away from wanting to throw
a baby bottle through the TV at those ‘freedom 55’ ads with the people on boats
and golf courses.
The reason you are in such demand with the RESP people is simple, when do you think its easiest to sell you something for your child’s future?
After they turn 6 and start imitating Miley Cyrus (be grateful it wasn’t a Kardashian)? When they discover what Sarcasm is?
When they start hanging out with the ‘cool kids’ and the Principal calls you into the office so many times teachers are starting to ask you if you’re the new lunch lady? Or when they’re cute, sweet, sleeping and you’ve only had to change a few diapers so far?
You’re excited, proud and know the sky is no limit for your little one. This kid is going to change the world!
He or she is going to be a great doctor or lawyer or rocket scientist, or invent a new super cool version of Bingo that everyone will love to play, whatever it is it will be something great!!! (All based solely on your own dreams for them and the fact that they have 10 fingers and 10 toes).
You want to give them every advantage/option possible so they can grow up and become the very best at what they’ll do, therefore you decide to bet long (18+ years until University) and you agree to give the RESP person (that’s sitting across the coffee table from you, smiling like they just broke wind at a dinner party and everyone’s blaming the dog) $100-$200+ a month because as they have most likely stated a few times by now ‘the sooner you start the more time there is for it to grow’ and ‘it will be a great return in the end’, …right?
Isn’t that kind of like thinking there is a strong probability that some day your baby will drive and if they live almost anywhere in this country they will probably drive in the snow so with this kind of logic and the fact that everything goes up in price over time you may want to purchase some snow tires this spring when they go on sale and put them away for when they do,
( wait, what is it that they’re going to be driving or in the previous paragraph, taking in University?)
Jump ahead 18ish years after all that saving and sacrifice for the future of little Molly and/or Bruno the day has finally come for the fruits of your commitments and the extra bump up coming from the Government contributions (which was one of the big selling features for you to buy it in the 1st place) everything will finally going to payoff in a super sexy way.
In a few short years…POOF, 1st doctor in the family!!! But something happens that you didn’t count on, beautiful little Molly or Bruno want to become a welder or a rodeo clown or a game show host (or even more likely a job that didn’t even exist when you started saving so long ago), now what?
First, you do run the risk that whatever the kid(s) decides to go into may not be consider RESP Eligible and if that happens all the money the Government put in plus interest goes back to the Government, and unless you were on top of it right from the start there is a good chance this ‘great investment option’ gained you about as much interest as a pathetic chequing account.
What if the kids choose to travel 1st before University and gain some life experience, or go to school aboard (as our world shrinks more everyday this is becoming somewhat of a norm), or have no desire to take anymore schooling after grade 12, or plan to start a business instead of University or want to marry now and think about school someday later in life, or, or ,or? In these cases or the countless others like them, see the 2nd half of the 1st sentence in this paragraph.
Even if your kids go to post-secondary and get
a ‘Widget Degree’ and you do get to use your under preformed RESP ‘windfall’ to
pay for it, these other things all have something in common… Who do you think
you’re kids a coming to for the down payment on their 1st house or the ticket
to travel, etc, etc, etc. ‘Bank Of Mom and Dad’, ‘Air-Parents’ and
‘Nanny-Granny’.
The point
I’m painfully trying to drive home is
KID$ CO$T MONEY!!! Not just for the time they are living under your roof but down the road of life as well and if you truly want the very best for them throughout their lives why are you only hopefully, maybe, possibly banking on being there for one of the many events, God willing, we will all have throughout our lifetimes?
Life is simply about constant change so why would anyone hamstring themselves with only 1 possible contingent? You wouldn’t pull your goalie before the game starts thinking the other team will never get the puck passed center ice for 3 periods would you?
The saddest part of this I find is that there are financial vehicles that at very worst could be used toward any of life’s events, used well could be used for more than one of them and if not deemed needed earlier on by you (not the Government),
could be used as part of your child’s future pension in their retirement many, many years from now. Think about that for a moment, your baby who’s only job currently is to look cute, make goofy eyes at Grandma and to fill a diaper could have a better pension than a very large segment of the population starting now and they’re still years away from being able to even say the word ‘work’. The best part is this could even be accomplished with the same type of money that you otherwise would have been allocating solely to your doctor dream.
1st you’re hearing of other ways to help your little ones beyond just savings accounts and RESP’s? How many are now reading closely wondering what these options are?
The bigger question I have is why hasn’t whomever you rely on for financial advice and guidance already shown you? You wouldn’t just give the neighbours a pile of money to put up a fence without 1st learning about what they intend to build or to a doctor without finding out what he’s plans to operate on but yet that’s often what happens when money comes into many of life’s plans.
Its said, ‘the only guarantee’s in life are death and taxes’, and for anyone not living in a Hippy commune let’s be realistic, ‘LIFE WILL COST MONEY’.
It may be you are one of those very few that truly do, do much better under pressure and the idea of your children coming to you at any given time and asking you for 10’s of $1000’s they need before the middle of next month will bring out the very best in you, but understand you are a huge anomaly.
At very least don’t you owe it to yourself, your partner and your kids to look into which options fits your/their world the best?
life always comes with a great assortment of options but unfortunately we often choose the ones with the big bows, the brightest paint or the most advertised over those with substance, ability and true value only to discover after we get back home, from our trip out to the country, that we didn’t buy the beautiful thoroughbred we thought we did but rather we got a pig covered in lipstick and an old dust mop tied to its rear.
There is no such thing as ‘one size fits all’, not in the clothing world, not in fitted sheets and definitely not in any type/style of investing.
You may
find for whatever reason RESP’s may in fact be a great fit for you and your
family, (even though, as we have already established, they are only good for 1
of several events your little ones will someday likely encounter), and that’s
just fine. I hope they truly work well for you and yours. However if you
believe that the likelihood is that your babies someday may need a little help
beyond just schooling throughout life and if there is any chance you think they
may turn to the ‘Bank of Mom and Dad’ you might find it very beneficial to sit
down with your financial people, (its not like you may be thinking, the `80’s
are long over. Its no longer based on ‘financial people are only willing to sit
down with people that have more than $500, 000.00 in savings.’ There is someone
there for everyone at all levels on knowledge and savings—-just do your due
diligence and make sure you’re happy with whomever you choose and that they can
do what you need them to do or move on…)
Be honest with yourself, if the kids came looking for help with school, a down payment for a home, some travel buck$ or any other life events (including the often forgotten emergencies and don’t fool yourself they happen to all of us sooner or later), will you and your partner be able to help them?
If you can and do find a way, what’s the likelihood that you’ll ever be visiting your travel agent again anytime soon, or even ever dream of early retirement again someday in the future? Sure maybe your old car with 350,000 km on it could last you for a few more years, but why would you want to find out?
