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wasn’t the RESP we have today and I wasn’t convinced it was the best deal going. But over time, the product has improved, the legislation has been made more user-friendly, and the reasons to use it have become crystal clear.

There are still plenty of people in Canada who aren’t using an RESP to save for their children’s future education. Only about 35% of eligible kids receive the Canada Education Savings Grant (CESG). That’s the money the federal government gives you to put money away for your kids. Really? The feds want to give you money and you don’t want to take it? What’s up with that?

If you haven’t been contributing to an RESP for your kids, it’s not too late to catch up on the whopping $7,200 CESG you may have been missing out on. Starting in 1998, the CESG accumulates every year for a child until he or she turns 17.

While there is no maximum that you can put into an RESP each year, there is a $50,000 lifetime limit. And you can catch up for years in which you did not make a contribution. The basic grant room is $400 per year from 1998 to 2006 and $500 from 2007 based on a contribution of $2,000—$2,500 a year. The maximum grant a child can receive in a calendar year is $1,000 provided grant room is available and a large-enough contribution is made. Don’t be tempted to catch up too much at once or you could miss out on grant room. Each year you can catch up for roughly one year of missed contributions.

GAIL’S TIPS

The Canada Learning Bond provides $500 for low-income families to establish an RESP account and allows for an annual contribution of $100. Despite the fact that the government is giving parents money to save for their children’s future education, the program only has an 8% participation rate. If you haven’t started saving for your children, and can’t come up with the money for a contribution this year, find out how to take advantage of the Canada Learning Bond and put the money to work for your kids now.

Let’s say you made no RESP contributions for Molly McGoo, who was born in 2000. The total CESG room Molly would have accumulated by 2008 would have been $3,800 ($400 for the years 2000 to 2006, and $500 for 2007 and 2008). If you set up an RESP for Molly this year, you can contribute up to $5,000 and grab a grant of $1,000. You put in five and the feds give you one—that’s an automatic 20% return on your money before it’s even invested. And Molly would still have $2,800 of unused room you could catch up in future years.

How much you save depends in large part on how much you can afford. Aim for the maximum amount of CESG, which is $500 for current contributions and $1,000 a year if a previous year’s contribution is also claimed. If you can afford to put away more, do it. Post-secondary education won’t be getting cheaper any time soon.

GAIL’S TIPS

I am not of fan of Group RESPs—typically called Scholarship Trusts—which have about 30% of the education savings market. A study prepared for the federal government found that group scholarship trusts have a number of drawbacks:

You must pay an enrolment fee and make contributions according to a preset schedule.

If you close a Scholarship Trust RESP before maturity, you forfeit the enrolment fee plus any investment gains and government grant money. So if you can’t keep up with the preset contribution schedule, you lose. And, no, you can’t simply transfer the plan. They won’t let you.

Some scholarship trust plans deny payments to students who are entitled to these benefits under government rules because some scholarship trusts don’t recognize all courses of study. If your child chooses something outside the plan’s parameters, they won’t be able to use the money in the plan.

If the group scholarship plan is cancelled for any reason, you get your contributions back, less their fees and without the investment income. The grant money is also repaid to the government and cannot be earned back later if new contributions are made for the same beneficiary.

Scholarship trusts have high fees. The report notes that in 2006, 20% of gross contributions went toward fees.

If you haven’t opened up an RESP for your wee one yet, today’s the day. It doesn’t have to be a ton of money. Can you manage $100 a month? $50? $25? Just get started. And the next time the grandparents want to know what to get Molly McGoo for her birthday, a toy and a small contribution to her RESP will keep her happy on her special day and give her options in the future.

GET BUSY SAVING

Pretty well everyone has heard the Save 10% Rule, but folks are still confused about what that means, so let me clarify. Save 10% means take 10% of your monthly net income (your income after taxes) and put it in long-term savings (like a retirement plan). If you have a pension plan at work, whatever goes in that can be counted toward your 10% long-term savings. If you also want to save for your children’s future education, that’s separate.

People are always giving me their excuses for why they don’t save. Which of these have you used?

“I don’t make enough to save anything.”

“I’ve got a lot of debt and I need to get that paid off first.”

“I’m too young to worry about retirement now.”

“What’s the point? The economy is in the trash and my money won’t be worth anything.”

“You have to live for today, man.”

Maybe the problem is that the Law of Inertia is working against you. The Law of Inertia says that a body at rest will remain at rest until some force acts upon it. A lot of the problems people have dealing with life, their money, everything, stem from this simple law. It is so much easier to maintain