Why the RESP could deny children the freedom to choose their own path

Is this it? Is the RESP the only option for my child’s future?

As parents, we want our children to have a better life than us. But today our children are drowning in student debt. When I went to university my tuition in Montreal was $960 a semester. When I graduated I had a total student debt of $9,000 and I paid it off in three years. And guess what: I had no RESP.

Today tuition costs $14,000 and a 4-year university education can cost as much as $68,000 when you include residence, food, cell phones, computers and partying. At the end of that wonderful experience, our 21-year-old children will graduate with an average debt load of $30,000, which according to the same financial experts will take them about 10 years to pay it off.

But that’s ok, though, because the bank advisor told their parents that they’d get 20% or $7,200 of free government money to help with their children’s education costs if they opened an RESP account at the bank and deposited $36,000 over 17 years into a government RESP account. But will that cover their costs? Hell no. Again, not to worry, the bank will come to their rescue. Since the $43,200 parents will be saving won’t come close to paying the projected $125,000 education costs for children who will be attending university in 2033, the banks and the government wants to help you.

In addition to the free $7,200 of free government money to help if parents deposit $36,000:,

 The government will lend 18-year-old children thousands of dollars in student loans, which will have to be repaid.

 The bank will also help if that’s not enough by allowing 18-year-old children to sign up to a $60,000 line of credit, which they can use without supervision for anything. Which will, of course, have to be repaid.

 According to CIBC, as much as 40% of all student debt is line of credits and loans from banks to young adults who can’t order a beer at the university pub.

But again. Don’t worry if the 21-year-old graduate can’t repay all their loans from the government and other banks, the banks are here to help again with a loan consolidation program.

However, if that’s not bad enough parents are now facing a new dilemma. What happens if their 3-year-old child today doesn’t want to follow a traditional path and

 attend a university that’s been approved by the government of Canada,

 not complete their studies and drop out halfway through, or

 change their major halfway through, or

 decide not got to university and go start their own business or get into a trade?

The choices we make for our children when they are babies could decide their fate for life. Could it be that the bank advisor who told parents to open an RESP might be denying children the freedom to follow their own dreams and locking them into a path they may not want to be on?

But it really doesn’t matter what we say. It’s up to parents to prepare for all scenarios when their children become young adults so they have the freedom to choose their own path. It’s up to you to protect your child’s future because the banks and government won’t. By learning about other options your child can have the freedom to choose their own path and not those hyped and marketed by banks and group RESP companies.

If information is power, then education is empowerment. We believe in educating parents on all their options when saving for their children’s future so that their children have the freedom to choose their own path.

Sample illustration of Child Plan™ Cash and Insurance Values

Based on a Monthly Deposit of $250 per month

Age Accumulated Cash Value Life Insurance Value
20 $82,568 (Education) $612,728
35 $177,953 (House) $1,115,297
45 $303,299 (Security) $1,115,297
65 $834,276 (Retirement) $1,666,824

Sample illustration is based on a monthly contribution of $8.32 a day/$250 a month for twenty years, starting when the child is less than 1 years old. Cash and life insurance values are based on the current dividend interest rate of 6% from a Canadian life insurance company. This example is strictly for illustrative purposes only, the annual dividend scale is not guaranteed and values may differ.

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*illustrations are reflective of the annual premium amount

To learn more how Child Plan will provide your child with the funds for their future education and financial security for life, book a virtual meeting with a Child Plan Advisor.

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