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Good, you came to the right place!Hi, my name is Chantal Sarkisian and I am a new mom who had a sweet baby boy named Victor in Feb 2013. Join me on this blog to follow my new mommy journey while I am on my maternity leave. I'll ramble quickly about all the random thoughts that go through my head when I am feeding in the middle of the night, or trying to put my son to sleep. I'll also blog about my favourite things, give you helpful tools, and explore activities to do (mostly in the Ottawa region) with kids and maybe some product reviews too! Thanks for reading!

Thursday, August 29, 2013

Group RESP versus Individual Bank RESP

Ok, so your baby is born.
You just registered them for their birth certificate, their health card and their Social Insurance Number (seems a bit silly, but you will need all of these documents!).
Now it's time to invest in their future... with a Registered Education Savings Plan!

I did all my research when Little V was only a month old. You need to get this taken care of as quickly as possible because as they say, time is on your side!

Here are a few different pointers that may help you while you are making your decision:

  1. Do your homework! Do not trust this post as your single resource. This is just a guide to help with my lessons learnt.
  2. You will need your child's SIN number to open the account.
  3. Time is on your side. Start as early as possible. Although this is a long term investment, your child will need the money in about 16/17 years from now, depending on when you start contributing.
  4. This is NOT and RRSP or RSP. You do not just open an account and contribute to it as you wish. RESPs are Investments that need to be managed.
  5. The benefit of opening an RESP versus a regular Investment plan is to take advantage of the Government grants that are available through RESPs only. 
  6. Group and Bank RESP plans both have the same rules and regulations when it comes to the grants. Depending on your families income, you qualify for certain amounts in grant funds. There is also a maximum that you can obtain and the grant is also dependant on the amount that you contribute yearly to your RESP account.
  7. Group and Bank RESP plans both have the same rules and regulations when it comes to the institutions that your children will use the money for. Ex: University, College, On-line courses. As long as your child is registered for post-secondary education, you can us the money.
  8. Check with your financial institution to clarify who gets the money when the account matures. The Government grants are strictly for the child, but I am almost certain that the capital that has been collected belongs to the parent and the parent hands it off to the child.
  9. Check into the fees that are charged by the banks or the group plans and shop for better rates.
  10. Know your options:
    • Group RESP like, are non-profit organizations that pool everyones money and invest on your behalf. Usually through bonds. This is a generally safer route, but it's not meant to optimize your investment. They buy bonds and let them mature until you are ready to use the money. If interest rates are going up (like they are predicted to do so), this in not an optimal solution because it's considered very "safe", therefore your return on investment is not that high (a riskier investment method typically can generate higher profit if you are careful with your investment). The down side to a group plan is that you must commit to the entire time (ex:16 years) you are contributing for. If you decide to stop at anytime, you get back what you contributed, but you loose all the interest your money was making you. 
    •  Individual or Bank RESPs are very flexible and offer the same benefits as group RESPs. The difference is that you manage your own money and you manage the monthly contributions that you want to give. I chose this option and invested in a balanced fund at a medium risk. (Please don't take my investment advice, I am not a professional!). You should be reviewing your investment on a yearly or semi-yearly basis to ensure that you are doing well. Closer to the mature date of your investment, you should be more diligent with checking on your account and switch to something less aggressive and more secure. 

I hope these pointers help, please write your questions down or let me know if you would like to add to this post :)

Buy low, sell high!... hahaha (That's the extent of my investment knowledge)

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