Sunday, 4 November 2007

Group RESP plans may not have your child's best interests at heart

I don't think there is any "may" about it. I am convinced that these plans are a rip-off based on vulnerability and lack of knowledge. And I could not believe, once I found out how bad these plans were, that no-one was regulating how they were sold, since they make mendacious claims. The advantage is created by the tax system. Given that government thinks we should be saving for our children's tertiary education, I was amazed that they take no interest at all in what was being foisted on their citizens.

We bought RESPs for both our children as a result of information collected at the hospital. We also got the Welcome Wagon treatment - free formula samples (even though breast is best) disposable diapers (I still think these are easier on babes and parents than washables and the energy/CO2 equivalent as far as I can see) and baby photos.

The RESPs came from USC. What I found out a couple of years later was that the plans had no actual value at all in their early years, since all of the contributions I had been making had been paid to the salesman as commission! In fact the only way to get anything like the value I was putting in was to stay in. Compared to the performance of my mutual fund based RRSP, the performance of the RESPs was dismal. In fact little better than a savings account.

What we could not have predicted is the way that provincial governments have shifted tuition funding onto students (or their parents), which in a knowledge based economy is pretty bloody cynical. Most students now end up in heavy debt - which of course helps to create a docile workforce, strongly motivated to keep their jobs in order to pay off their debts. And then we are surprised that family formation suffers: no-one can now afford to get married, buy a house and have kids straight out of university like my generation did.

If someone gives you a pamphlet from University Scholarships - or one of their competitors - throw it away. Talk to an independent financial advisor, and set up your own savings plan. Don't give your kids education funds to some smooth talking salesman - your kids need that money more than he does.

2 comments:

Me Contra said...

Hear, hear - read another one: http://mecontra.blogspot.com/2008/09/resp-issues-usc-resp-heritage-resp.html

Anonymous said...

We signed up with USC and now I have to get advise from a lawyer. Just found out today that my first son now nearly 19 cannot get all his money as he is not going to school for 4 years. So I wanted to then throw the money altogether with my other sons account as we where told at signing up our 2nd child. 1st son has classic account and 2nd son has family account. Classic account nolonger available so cannot put together. We will be out $5000 not much but alot to us. I would not advice anyone to put their money in USC education savings plan. Just a RIPE OFF