RESPs are a feel good gift toward your child’s future, but predatory companies take advantage of unsuspecting parents. Reddit is littered with stories of parents getting duped. This article will shed some light on what to avoid when saving for your child’s eduation.
Picture this: You just got home from the hospital, and a random number calls. You pick up (it might be the hospital and you forgot something). Nope, it’s a salesperson from a company you never heard of telling you to start planning for your kid’s future. You’re running on 2 hours sleep, want to do the right thing for little Jimmy, and sign up. What’s next?
Fees, and a lot of them.
Enrollment fees, admin fees, trustee fees, sales charges, and even contribution fees. But the worst of the lot is early withdrawal fees, most between 10% and 20%.
You gave up the keys to the car.
Want to pause payments? You may lose a percentage of your contributions to date.
Want to switch to another institution? More fees.
How about adjusting the investment? Nope.
The group pools all the contributions and invests in a one-size-fits-all portfolio. Whether your child is 1 day old or 1 day away from high school graduation, the portfolio is the same. For all the fees, it’s not a white glove service.
However, it’s important to navigate the landscape carefully and understand the potential risks and benefits of these plans.
Decoding Complex Fee Structures:
One common concern with Group RESPs is the complexity of their fee structures. As millennials, you value transparency and want to understand where your money is going.
Some Group RESP plans may have enrollment fees, administration fees, and penalties for early withdrawal. It’s crucial to carefully review these fees and assess how they may impact your overall savings potential.
Balancing Flexibility:
Millennials often have dynamic career paths and financial situations. Group RESPs may have rigid rules and restrictions, making it difficult to adapt to changing circumstances. For instance, regular contributions over an extended period may not align with your fluctuating income.
Ensure you have a clear understanding of the plan’s flexibility and any penalties associated with early withdrawals or changes in beneficiary designations.
Navigating Returns:
Group RESP returns can be influenced by market fluctuations and investment decisions made by the plan’s trustee. As a millennial, you’re likely eager to see your savings grow. It’s important to consider the potential for uncertain returns and the impact they might have on achieving your education funding goals.
Ask questions about the investment strategies and historical performance of the plan.
Seeking Transparency:
Transparency is a vital aspect of any financial endeavor, and Group RESPs are no exception. Be cautious of providers who lack transparency or use misleading marketing tactics. Look for reputable providers who disclose risks and provide clear information about their plans. Conduct thorough research, read reviews, and consult with professionals to ensure you have all the necessary information to make an informed decision.
Navigating Regulations:
While most Group RESPs operate within legal boundaries, it’s essential to be aware of potential scams or fraudulent schemes.
As millennials, you’re tech-savvy and well-equipped to research and identify reliable providers. Be diligent in checking the credibility and reputation of any Group RESP program before committing your savings.
Conclusion:
As a millennial, saving for the future is a key consideration, and Group RESPs can offer a pathway to fund higher education.
However, it’s important to navigate these plans wisely and be aware of potential risks. Seek transparency, carefully analyze fee structures, consider flexibility, and conduct thorough research to identify reputable providers.
By taking a proactive approach and making informed decisions, you can ensure that your education savings align with your long-term goals and aspirations.