a peek inside the fishbowl

31 Aug, 2012

A back-to-school-post with food for thought

Posted by andrea tomkins in: Fishbowl patrons|parenting

There is always an influx of back-to-school related articles this time of year, isn’t there? I’ve read a lot about back-to-school fashion, school supplies (Ha – I wrote one myself), study habits, and healthy lunches, but I want to take a moment to look further down the timeline with the help of Fishbowl patron Tradex.

As parents we are often worrying whether our kids are doing their homework and wearing their rain boots, but there are bigger things we need to think about too, namely the issue of paying for our children’s post-secondary educations.

Mark and I figured out that RESPs are the best way to save for this inevitable expenditure. For two big reasons:

  • It’s a great deal that includes FREE MONEY. How could we say no to free money? The government kicks in a percentage of the amount you contribute. And if this free money is invested early enough it starts to earn interest. And you know what that means, more free money. Woot!
  • It’s a forced savings. And although I’d love to spend that money elsewhere it’s far better than coming up with the cost of tuition (and everything that comes with it) the day after high school graduation.

My friends at Tradex wanted to make sure you knew about a couple important things about RESPs.

Starting early is key. It means you can reduce your contributions and let time do the rest. Over a 10-year period, an annual $2,500 contribution along with the maximum government grant of $500 (see previous about free money) entirely invested in a Canadian Equity Mutual fund compounding at 8%, will grow your RESP savings to $43,459.69. This can be achieved with monthly contributions of about $200.

And here’s something that many people don’t consider: Tuitions go up. And increases in tuition tend to be much higher than the general rate of inflation. AND there’s more to it than just tuition, there are “Compulsory Fees” for example, athletic fees, student association fees, etc. And according to some recent Statscan numbers these averaged $820 in 2011/2012, up 5.5% from 2010/2011. This is more than pocket change for many of us.

Some parents start saving money without having any actual idea of how much they actually need. Guess how much the average Canadian undergraduate student in dentistry paid per year of schooling?

Just guess.

Dentistry students (or maybe the parents of dentistry students!) pay the most at $16,024, followed by medicine ($11,345) and pharmacy ($9,806). Can you imagine shelling that out all at once? You MUST check out this document from the UBC dentistry program that calculates projected costs for the class of 2016. I suspect you will need resuscitation after you do.

Not all programs are this expensive, but they’re expensive enough. And for parents of two or more children it means we will be laying out twice as much.

Check out these real-life invoices Tradex received when processing recent RESP withdrawal requests. I challenge you to have a dollar figure in mind before you click and see them for yourself. You may be surprised!

Tradex has a great idea to share with you. Ask grandma and grandpa to contribute to your child’s RESP. Heck, they can make it a back-to-school tradition! Even a few dollars a month, starting from infancy, can make a big difference. There can even be multiple RESP’s in existence for a particular child as long contribution limits are observed. (I had no clue!)

Anyway, thank you Tradex, for this much-needed wake-up call! And if you have any questions or comments about RESPs you can leave them in the comments below or check out the Tradex website.

15 Responses to "A back-to-school-post with food for thought"

2 | Mark

August 31st, 2012 at 9:46 am


I worked with someone who proudly explained that they were putting away a set amount in a jar monthly for their child’s education fund. I think the sentiment is wise but they are missing out on the government grant money which is essentially an instant return on investment. Forced saving is great but investing it wisely is better.

3 | Jayda

August 31st, 2012 at 12:28 pm


Ever since we moved back to Canada, we have made RESPs a major priority for our children. We have 5 years to catch up on. It is a great product. In our family Grandparents do not buy gifts for the boys, instead they give them money towards RESPs for every birthday and Christmas.

4 | Kaitlin

August 31st, 2012 at 1:56 pm


Jayda, that’s a fantastic idea!

Honestly, I would not have been able to do an M.A. if it weren’t for my RESP.

5 | andrea

August 31st, 2012 at 2:20 pm


Mark: Methinks the old-fashioned dollar-a-day idea is not going to cut it!

Jayda: I think that is amazing! The grandparents you speak of sound very progressive. (It is a hard thing to ask someone to do, isn’t it?)

Kaitlin: you make a great point about M.A. studies. They also qualify for RESPs!

6 | Stefania

August 31st, 2012 at 3:35 pm


Question for you…would you be willing to withdraw money from a child’s RESP if it wasn’t for university or college? Let’s say your daughter loves art and has an opportunity to study fine art in say, Paris for a year or even a summer. Do you let her go, knowing you may be scrambling for her university or college education? Or do you say no since you can’t afford it.

7 | Deanne

August 31st, 2012 at 3:47 pm


RESPs are definitely important but a couple of things here:

1. 8% rate of return? Those are not realistic numbers. Most financial experts would say 4 to 6% is more realistic, depending on how much risk you want to take on. That said, you will get a 20% rate of return on your money just by contributing $2,500 each year, since you get $500 in grant money from the government.

2. Watch the fees you are paying on various mutual funds. A standard Canadian Equity or Balanced Fund has a management expense ratio of 2.5%, which eats into your rate of return.

8 | andrea

August 31st, 2012 at 5:35 pm


Deanne: I will have to defer to Tradex to answer your question about the rate of return. I’m guessing that the RESP investment is high-risk to begin, and then a few years before graduation it all gets flipped into something low risk. The 8% might be an average… not sure. Stay tuned!

Stefania: I would totally encourage my kids to take a year and study art in Paris, but only if they got a job, saved the cash, and brought me along with them. :)

9 | Nikki

August 31st, 2012 at 7:17 pm


I finished my medical residency 2 years ago. My debt, between undergrad, med school, and residency (when I was partly supporting my grad student husband): $150,000. People always say, “yeah, but you’ll make it back,” but I’m telling you that it’s still a breathtaking amount of debt. We are trying to buy our first house and just barely managed to secure financing because of our enormous debt load. I regularly lose sleep over it.

From the time I was born, my parents scrimped and saved for an RESP for me, and it paid for the first year of my undergrad. I am really grateful for the help, but it’s true that it’s hard to envision how much tuition rates will go up 15 or 20 years from now.

We started an RESP soon after our first child was born. At the moment, we put all the money we get from the Child Tax Benefit and the Universal Child Care Benefit into an RESP. I realize that as my career gets going, those will drop and we’ll need to put in more of our own money, but for now, it’s like using free money to get more free money. It feels great.

10 | Mary @ Parenthood

September 1st, 2012 at 6:12 am


We have an RESP which is grandparent funded, although we would have contributed if that wasn’t the case, because: free money.

But I do have to take issue with the “inevitable expense” comment. Yes, education is expensive. It is still possible not to incur debt while going through. It means a level of sacrifice and delay that many young people aren’t equipped or willing to deal with, but I’m hoping that my children are going to learn how to make good choices!

Incidentally, I didn’t get a penny towards my education from my parents. My sister received significant funding. Guess which of us had the debt? I figure I was the lucky one because I had the opportunity to observe the effects of bankruptcy AND my parents made me live on a strict budget that I controlled starting when I was 16.

11 | andrea

September 1st, 2012 at 8:03 am


Mary: I used the phrase “inevitable expense” instead of “inevitable debt” for a reason. There is a difference. Our kids post-secondary education WILL be an expense. It’s certain, it’s coming. It is not an inevitable debt, but it is for the vast majority of families out there. I’m hoping it won’t put us into debt, hence the RESPs. But we won’t be the only ones shelling out. The kids are expected to save a considerable amount for their educations. I don’t ever want them to equate the money we’re working hard to help them save with a free ride.

12 | Mary @ Parenthood

September 1st, 2012 at 11:46 am


I guess my point was that it’s a chosen expense, not an “inevitable” one :)

And that if not chosen, it doesn’t follow that kids will get an “inevitable” debt!

(but I agree it’s a nice choice to be able to make!)

13 | laurel

September 1st, 2012 at 8:37 pm


HI Andrea!
As the parent of a 2nd year university student who wants to be a Doctor, I am all to familiar with the cost of post secondary education AND medical school fees have risen incredibly over the years. Queen’s is at about $20,000 per year now and MacMaster is at $24,000 and that’s just tuition:(

Max is at Queen’s and tuition for his undergrad program is $6850 and then there’s books $800-1200 and rent and food etc. First year all in with residence and meal plan and everything was over $21,000 although subsequent years are cheaper due to living off campus and managing one’s own food budget.

We had RESP’s until Max went into first year. Read the fine print. You can only take out so much at a time in the first few months, mostly due to students that start school and then drop out or drop courses and take the refund money and run to Maui or something:) so in order to not have this happening and the money used for school, new rules have been imposed (kind of like the big, bulky and inconvenient inventory control tags on clothes in stores) to take care of those not on the up and up.

We found this both surprising and frustrating and were lucky enough to find out this information (by accident) in enough time to get organized for funds. BECAUSE in first year you must pay ALL fees around the same time but your RESP only let’s you take out limited funds for the first 4-5 months.

Also, we have since collapsed our RESP’s even though we have a 12 year old in addition to Max at school because we chose to buy a house in Kingston to rent to Max and his friends. It’s not the right scenario for everyone. You must take into consideration your day to day finances, your tax level and more but it works best for us.

That being said, we started both RSP’s and RESP’s very young and are happy we did but with the state of the economy and the markets having been more down then up, it’s good to diversify and not have everything in one place:)

14 | Brien

September 5th, 2012 at 1:32 pm


Some excellent comments. Deanne, you are quite correct that fees, in the form of management expense ratios, are an important consideration when evaluating mutual funds. One of Tradex’s guiding principles is low cost (the m.e.r. for our Tradex Equity Fund is 1.29%). On the question of returns, I agree that looking back over the past 10 years makes 8% seem unattainable. And I certainly think it is best to err on the side of conservatism when making projections. However,since we have the data for our own Tradex Equity Fund going back to 1960, it is worth noting that the average annual compound return over all 10 year periods (month to month) is 10.4%. There have been some pretty spectacular periods (22.4% per year for the 10 years ending March 1987) and some not so much (2.2% per year for the 10 years ending August 2010.) (Please see the full disclosure page at http://www.tradex.ca/p_ratesofreturn.shtml.)
Andrea, your assessment is accurate, i.e., the early years can be used for a higher proportion of growth-oriented investments, shifting to a more conservative portfolio as post-secondary education looms. And as you both have pointed out, the best return of all is a 20% grant from our friends on Parliament Hill!

15 | Ottawa Giveaway Alert: Tradex wants to stuff your stocking! >> a peek inside the fishbowl

December 4th, 2012 at 1:09 pm


[…] great little giveaway is brought to you by Fishbowl patron Tradex. (You may recall the RESP post I wrote that was inspired by […]

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The Obligatory Blurb

My name is Andrea and I live in the Westboro area of Ottawa with my husband Mark and our dog Piper who is kind of a big deal on Instagram. We also have two human daughters: Emma (20) and Sarah (18). During the day I work as a writer at The Royal Ottawa Mental Health Centre. I am a longtime Ottawa blogger and I've occupied this little corner of the WWW since 1999. The Fishbowl is my whiteboard, water cooler, and journal, all rolled into one. I'm passionate about healthy living, arts and culture, family travel, great gear, good food, and sharing the best of Ottawa for families. I also love vegetables, photography, gadgets, and great design.

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