Updating ambiguity averse preferences

You will also pay depository charges, administration fees, trustee fees, custodian fess and investment fees.

Also, you’ll derive full benefit from the program only if your child attends a four-year degree program.

Returns: You should keep in mind that scholarship plans are invested in low-risk and low-return assets like T-bills, bonds and mortgages.

Also, note that fully one-third of returns are “discretionary payments” and around 12% was due to “attrition”. In my opinion, you should carefully consider the alternatives and decide for yourself if they are better. There is no RESP administration fee and I am able to invest in one of the lowest cost mutual funds available.

It gives me flexibility (I can decide to contribute or skip entirely.

The little I did read about them suggested that I should stay away.

Nothing that I learned while researching this post made me change my mind. In a Group RESP plan, contributions are pooled together and invested in fixed income instruments.

Remember, most people have other priorities like saving for a retirement and paying off their mortgage) and control (my kids are very young, so the portfolio is heavily tilted toward equities.

If your kids have five years or so till university, you should be invested in bonds or GICs).

What should I do if I have already enrolled in a Group RESP?

It makes no sense to stop contributing to a scholarship plan because only your contributions less fees are returned to you.

The return you should expect from scholarship plans will be similar to what you can get from bonds (around 5% currently) plus the earnings on capital of members who dropped out less plan expenses.

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