RESP Education Fund Mistake

[Cpt. Fantastic]

And even better brother

But in all seriousness, if you have the means, setup an RESP for your neice and contribute to it. I did that for a while for my niece (before I was married and had my own rug rats to deal with.) Now it isn't much, but it's a hell of a lot better than nothing

Ya, I'm likely to go that route. I still owe my niece a birthday present and my thought was to start a plan. One thing I'm trying to figure out is, if my sister keeps her plan, will my RESP plan gain any advantage being an RESP? Or am I better served just making an unregistered account and giving her the money when I see fit?

[Xoron]

One thing I'm trying to figure out is, if my sister keeps her plan, will my RESP plan gain any advantage being an RESP?

Two advantages:
1. RESP grant (assuming it isn't all eaten up when her parents contribute, assuming it continues)
2. Tax free growth, and when withdrawn, taxed in the child's hands. Likely at a MUCH lower tax rate than you'll have.

[Plugging Along]

As much as I want my niece to have every chance at post secondary education, I really don't think it's wise that my sister and her husband are putting $50 away for that idea when they have so many other financial problems as it is. The other side of it is, having an extra $50 a month is likely not going to go towards bringing down the debt. It will likely go wasted on things they don't need.

The reason why I was sounding very hyper controlling in my earlier posts is because of the stress this is causing on my parents. My dad is 66 and feels like he can't retire because of how much my sister relies on them for financial support. It's sad really, I'm trying my best to help get involved and see if I can make a difference, but it's made little impact so far. For instance, I had my sister over to review their finances (her husband had no interest in coming), they want to move out of their crummy apartment and into a townhouse or something. I explained some of the things they'd have to cut, for instance they spend well over $100 for cable because her husband has to watch all of his sports. They spend well over $100 in cell phones. They go on trips often (to visit his family in the US and Caribbean). But they refuse to cut anything. The best I did was had them switch from $60 internet to $30 internet. That's all I could accomplish so far.

Anyway, thanks again for all the information everyone has provided. Clearly this is more than an RESP Education Fund problem, but I'm trying to tackle one thing at a time.

I am going to throw my 2 cents in. My advise is not based on what the best financial decision, as the other members here are much more astute with that area. I will say based on the family dynamics and over all environment. I would say have your sister stop the RESP through the group plan. This is a liability to her in terms of cashflow, and therefore an additional burden to your parents. I understand they want the best future for your neice, but throwing $50 in to a plan, while they are continually racking up debt is not going to help. I would start cutting out all liabilities as you have already said that you have tried. Forget about the sunk costs, and take what they can. The exception is if there is no penalty or fees to stop the contributions, then just let it sit. Your sister needs to get her current financial house stable, before worrying about future costs.

If you are in the financialy position, and you want to do so, I would open up a seperate RESP for your neice, and manage it yourself. This is only if you want to, but then you do get to have that control. Having coming from a highly financially literate family, I know when my brothers tried to force change on me and I wasn't ready, it didn't work. They just kept showing me by example, and making suggestings on what I could do differently. Fortunately, it started to stick when I got out of school, but that was because I was ready to learn.

[Cpt. Fantastic]

Two advantages:
1. RESP grant (assuming it isn't all eaten up when her parents contribute, assuming it continues)
2. Tax free growth, and when withdrawn, taxed in the child's hands. Likely at a MUCH lower tax rate than you'll have.

Perfect. I was most worried about #1 and had assumed #2. Good points, thanks!

[Xoron]

Perfect. I was most worried about #1 and had assumed #2. Good points, thanks!

One disadvantage: it'll be slightly more complicated to withdraw the money for her for school. You'll need proof of enrollment and withdrawing the funds should be done in a particular way to take out the RESP grant money first. (I'm no expert, but there are a few good websites out there: http://www.moneysmartsblog.com/resp-reference/)

[Cpt. Fantastic]

I am going to throw my 2 cents in. My advise is not based on what the best financial decision, as the other members here are much more astute with that area. I will say based on the family dynamics and over all environment. I would say have your sister stop the RESP through the group plan. This is a liability to her in terms of cashflow, and therefore an additional burden to your parents. I understand they want the best future for your neice, but throwing $50 in to a plan, while they are continually racking up debt is not going to help. I would start cutting out all liabilities as you have already said that you have tried. Forget about the sunk costs, and take what they can. The exception is if there is no penalty or fees to stop the contributions, then just let it sit. Your sister needs to get her current financial house stable, before worrying about future costs.

If you are in the financialy position, and you want to do so, I would open up a seperate RESP for your neice, and manage it yourself. This is only if you want to, but then you do get to have that control. Having coming from a highly financially literate family, I know when my brothers tried to force change on me and I wasn't ready, it didn't work. They just kept showing me by example, and making suggestings on what I could do differently. Fortunately, it started to stick when I got out of school, but that was because I was ready to learn.

Thanks, that's likely the route I'm going to take (both accounts, at least advise my sister on #1)

[Plugging Along]

Forgot to add, you're a great son, brother, and uncle too.