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Since becoming a regular visitor of this site, I have been working hard to get our financial house in order. We have been paying aggresively on our LOC. The balance has been lowered from $37K to $12K in about 15months. This is our only debt, except for mortgage. We have increased our monthly mortgage payment to the maximum allowed. We are not paying into our RRSP's or TSFA at this point (have a balance of $220K in all accounts as of today).I wanted to eliminate all debt before contributing anymore.

Our oldest child is 13 (gr. 8) and if all goes well, will be entering some sort of post-secondary institution, fall 2015. The younger child is 5 years behind. We have only $10K in the RESP so far. Should I ease off the LOC payments to make the required RESP payment to maximize the CESG portion...or fore go the RESP right now until the LOC is completely gone, which will free up a big portion of our income.

Thanks in advance
 

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Let the kids pay for their own education! Seriously, you can help them out but within reason. You have your own financial house to get in order and you're not there yet. You have made excellent progress (how the heck did you rack up $37K in debt??) but IMO ought to continue down that road.

<broken record> How is your rainy day savings plan? IS there a rainy day savings fund? I think this is the time for you to look out for #1. Only when you are debt free (other than mortgage) and fortified with strong rainy day tiers should you (IMO again) consider paying for someone else. You obviously love your kids but they'll learn a lot of valuable world lessons by getting part time jobs, which should strengthen their resolve to do well in college. Some of the crap jobs I've worked gave me a real appreciation for the results of hard work and a good education. By all means help them but there is NO shame in looking after yourself first in this case.
 

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I agree with Royal that people should get their financial house in order before contributing to an RESP. However, it's not clear at exactly what point is your financial house in order enough to contribute to an RESP?

You didn't include your age or retirement goals which are factors which should be considered.

Your situation sounds pretty good - maxing out mortgage payments and you've paid off $25k of LOC in 15 months. At that rate, it could be gone in about 7 months.

RRSP + TFSA = 220k. Not bad, assuming you aren't overly old.

You are running out of time on the RESP since you can only make up one year of contributions per year.

I would ease off on the LOC and contribute more to the RESP.
 

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Discussion Starter #4
Let the kids pay for their own education! Seriously, you can help them out but within reason. You have your own financial house to get in order and you're not there yet. You have made excellent progress (how the heck did you rack up $37K in debt??) but IMO ought to continue down that road.

<broken record> How is your rainy day savings plan? IS there a rainy day savings fund? I think this is the time for you to look out for #1. Only when you are debt free (other than mortgage) and fortified with strong rainy day tiers should you (IMO again) consider paying for someone else. You obviously love your kids but they'll learn a lot of valuable world lessons by getting part time jobs, which should strengthen their resolve to do well in college. Some of the crap jobs I've worked gave me a real appreciation for the results of hard work and a good education. By all means help them but there is NO shame in looking after yourself first in this case.
The $37K is a vehicle (that is now old and will have to be replaced soon...plus home reno's a couple of years back :(

We have no other cash...For now our emergency fund is our LOC (I guess EI would be enough to cover basic expenses...however I am very secure in my job and have been put in charge of a major project that will span a 2yr time frame). I am also completing my master's degree (paid for by work) to improve my capital worth in the market place. Wife is a RN and is also quite secure.

I agree with Royal that people should get their financial house in order before contributing to an RESP. However, it's not clear at exactly what point is your financial house in order enough to contribute to an RESP?

You didn't include your age or retirement goals which are factors which should be considered.

Your situation sounds pretty good - maxing out mortgage payments and you've paid off $25k of LOC in 15 months. At that rate, it could be gone in about 7 months.

RRSP + TFSA = 220k. Not bad, assuming you aren't overly old.

You are running out of time on the RESP since you can only make up one year of contributions per year.

I would ease off on the LOC and contribute more to the RESP.
My wife and I are both early 40's and would like to retire to the warm weather when our youngest child finishes 4-5 yrs of post-secondary....so in 15 yrs when we are late 50's.

I was thinking that it would be nice to have a minimum of tuition and books for each child for each semester....so ~$3K per semester (2 semesters per yr for 4 yrs) for a total ~ $25K for each child and a grand of $50K. I will not be paying for any rent or new vehicle for my kids. They can live at home...we have a university and many technical institutions in our city.

I feel pressure to be prepared for the university stage...even though wife and I both survived on student loans and pt jobs
 

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I'm of the thought process that it'd be nice to help out the kids as much as possible. I'm glad my parents did, as my debt load would have been massive getting through undergraduate, medical school, etc., even with the scholarships that I had.

I think the RESP is a good savings vehicle to achieve that, especially given that the benefit is 20% vs. LOC interest at 5%? At your stage, having 220K in savings is excellent in your early 40s ... the LOC will come down still relatively quickly, but I wouldn't lose the year of RESP benefit.
 

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I like the idea of splitting post-secondary expenses evenly. Having said this, I'd put some in RESP and LOC whatever's left. The 20% comment is right, and saying "let the kids pay for their education", speaking as a parent, doesn't necessarily mean put the whole burden on them. Paying 1/2 of the education costs would still require them to get a job (important imo), but not a 40-hr/week job.
 

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I am all for helping out with post secondary education. I worked full time over the summers to make as much as I possibly could for school. My folks help to keep me on track, pay checks went to them, I got a little to spend for the week. at the end of the summer, my folks kicked in what was needed to get me through the school year.

This worked well for us, and I plan to do something similar for my kids. I have some time, they are only 2 and newborn.

I would split up your savings to provide something to the kids, but focus mostly on your retirement.
 

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I'm of the thought process that it'd be nice to help out the kids as much as possible. I'm glad my parents did, as my debt load would have been massive getting through undergraduate, medical school, etc., even with the scholarships that I had.

I think the RESP is a good savings vehicle to achieve that, especially given that the benefit is 20% vs. LOC interest at 5%? At your stage, having 220K in savings is excellent in your early 40s ... the LOC will come down still relatively quickly, but I wouldn't lose the year of RESP benefit.
I like the idea of splitting post-secondary expenses evenly. Having said this, I'd put some in RESP and LOC whatever's left. The 20% comment is right, and saying "let the kids pay for their education", speaking as a parent, doesn't necessarily mean put the whole burden on them. Paying 1/2 of the education costs would still require them to get a job (important imo), but not a 40-hr/week job.
I am all for helping out with post secondary education. I worked full time over the summers to make as much as I possibly could for school. My folks help to keep me on track, pay checks went to them, I got a little to spend for the week. at the end of the summer, my folks kicked in what was needed to get me through the school year.

This worked well for us, and I plan to do something similar for my kids. I have some time, they are only 2 and newborn.

I would split up your savings to provide something to the kids, but focus mostly on your retirement.
I tend to agree with these posters.

Since your kids would be joining the post secondary education in 4-5 years time, you should be putting some of the money in to their RESPs to get the benefit of 20% CESG from the Government. This is the maximum return you can get safely on your investment. Moreover, you would be helping out not only your kids but yourselves as well because considering your income your kids may not be able to get OSAP loans for their studies. Also, RESP is also a good plan used for income splitting as your investment grow tax sheltered in the plan and the income is later taxed on to your kids who supposedly are in lower tax bracket at the time of withdrawal of money from the plan.

Pramod Chopra
 
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