237: Hidden Ways to Funding Higher Education and Avoiding RESP Limitations!

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So how do you prepare for your kids to go to post secondary school in 2024 and beyond? Joining us again is Laura Harkin. She's been married for 25 years, has three amazing almost grown children. Running a family business has its challenges. We discussed many of those on the last time a that she joined us on the podcast. We'll we'll put a link to that down in the description. Today, however, our focus is on the youth of tomorrow and some of the challenges of a post secondary education. I'm joined again with my colleague Henry Wong and together we're going to unpack some of the costs and and aspects happening in a university education in in Canada today. And we're going to have some real world experience to walk through with Laura. Her, her oldest is about to enter her fourth year university here so so we have a lot of great stuff to talk about. Laura, thanks for coming back to the program. Henry, good to be with you. I'm excited about this topic. Where would we like to begin this journey of conversation?

Yeah, I'll just share that. Let's maybe talk about why we're here in the first place. Laura listened to our previous podcast episode Richard, which we talked about back on June 2024 on the RESP and we were talking about it from the vantage point, just using my own experience because I like to say I'm a little bit young but I'm actually quite far away from post secondary school and I was in a deregulated tuition fee program. Now she actually reached out to me and whenever I get to chat with Laura it's always an awesome time because we have a lot of great conversations and she actually fact checked me and put in some more specific details of the information because she's actually going through the situation to talking about it from a tuition standpoint and actually a cost of living standpoint because I actually last taught at a university back in 2022 and it's actually really surprising how quickly things have changed and I know as listeners know that they are actually living that right now. So you know, I'm clearly out of touch with what true cost post secondary education is and I wanted to bring my Laura with us, Richard, to talk about actually what the experience is like going through it with her daughters. And the other part of just really the discussion to dive into is, you know, talking about the tool as it relates to an resp. If we look at the context of it, it's just a really.

Component, I would call it a small component to the bigger picture of the process as it relates to raising and developing children in today's environment. And this is kind of where I just want us to be able to explore the conversation specifically related to it. And I mean, Laura can actually speak to a lot more of, let's say the pains and the limitations and the challenges she's faced with it. So yeah, I guess I wanted to just have everyone get an awesome chance to listen to Laura's experience and then we can dive into the process of how we wanted to go through that conversation.

Well, I'm excited. Laura, you've got, you know, prior to us jumping on, we discussed a few of the details and you sent us some very detailed breakdowns of what is what it's costing you actually in, in real dollars to help your daughter go through school and some of the challenges that are in there, things like compulsory fees and so forth. And so walk us through a little bit about your experience. Now your daughter's about to enter her fourth year, but let's maybe rewind the tape a little bit. What was happening? What were you thinking about, you know, four years ago, five years ago, as she was approaching your oldest, approaching the stage of entering a university platform? What were some of the things you and your husband were discussing and talking about at the kitchen table?

I know it was kind of a weird time because it was Covid.

Our biggest concern was whether or not she was even going to be allowed to live in residence. That was, that was a big part. And she'd always kind of wanted to go away to school and we thought that was in all our kids best interest, you know. And it's not for everybody, it's not for every kid, it's not for every family. It's a huge financial burden.

Luckily for us, you know, we were very fortunate. Family friend, not really friends, but family always contributed to the kids birthdays and all that money we always put into the resp. We started resps for our kids from very, very young.

Probably from birth time, I think. I can't remember exactly going back, you know, 20 years, but definitely a long time. And we maxed them out for pretty, pretty early on. Some of the things I found funny was I remember I overpaid for one of my kids once. So what I didn't know is you're only allowed to put 50,000. The government only tops up, I think at the 35,000 mark. I might be off a little bit there, but I think so. And I remember my financial advisor saying, no, no, you can't put that this year into Leia. You need to put it into the next kid. And I said, well, why? She just was like, oh, there's a limit in my research. Now I realize the government actually penalizes you or gives you a penalty of 1% until you bring that number back down. So they don't want you having extra money. So the most you can put is 50,000. Give their top up, which I think they're now giving me a little bit more than before. I think it used to be 5,500. I think it might be 7,000 now or something. We take that all in and you gotta hope for the best. You gotta hope for 18 strong years in the market and hope that in that 18 there's no down years.

Over the last 20 years. That's how it's worked, hasn't it been over the last 20 years?

There is. Well, I can tell you in the last 13 days.

My resp has lost.

Just over $2,100 in the last 13 days. So, I mean, I'd had a good run from June, middle of June, till the end of July. And then August hit and pretty much whatever we gained was lost again.

Thankfully, we didn't request to pull out any money for the resp. Right now we were kind of holding off because I have to play the markets when I pull money. And as Henry knows, I also have to play the tax structures for my eldest daughter. We have to manage her taxes because she.

She was really, she was really fortunate to get a summer internship a couple of summers ago. The firm liked her. They kept her on through the school year.

She has other sources of income. She has a dance company, different things. So she's, she's a really, she's a go getter. So now I have to balance how much we pull from an RSP because she's going to get taxed on it because she doesn't fall under the $15,000 threshold income tax. So, you know, I was hoping, or I was planning, as you guys know, for my second trial to start this year. But she's now decided to defer, but I need her money for the other one. So you have to balance it all. And I can't pull from this one now because she's decided to defer and she deferred because of the residence issues.

You know, when she applied for school, she was guaranteed residence. Didn't happen. And.

You know, trying to find housing for a young person who's already really anxious about going to school, then tack on trying to find housing with virtual strangers because you don't know who you're going to be. You know, you're going to try to find housing with strange people. Strangers, not strange people. Strangers. And so she's, she's decided to defer. Maybe till January, maybe till next September. We'll see how it goes. And now her money's locked. It's stuck in there, and I can pull it out. Thankfully, a few years ago, it was recommended to me to, to merge my three RSPs. So each kid had their own. We merged into a family because it was pointed out to me that there's a good possibility not all three of my kids would go to post secondary if I'm lucky too. So different kids can use each other's sibling money to pay for school. But of course, minus the government portion, the government grant portion. And then in my recent discoveries, on top of that, the government takes a 20% penalty if they don't go from your money. So it seems they don't want us to scam the system. Not sure how we would do that, but apparently they're afraid we're going to scam the government, we're going to scam the taxpayers, so they're going to hit us for another 20% of. And I get to claim it and I have to take the money because I'm the sponsor, not the beneficiary. So I'm going to pay tax on the gross or the growth at my tax margin, not my kids, who was at, you know, hopefully under $15,000. So it's a real kind of, you know, smorgasbord of different things going on there. But yeah, we had always planned for the kids schooling. We had money aside. And then when we maxed them out, we created separate trust funds for the kids after we, we maxed them out and put money in there. And, you know, about two years ago now, I guess, Henry, we've known each other about two years now. Yeah, we started realizing, wait a second here. Here's all this money sitting in a. A trust account that at the time was actually losing $175 a month.

Because of fees and the way the markets were. So that was, that was not so great. So we actually cashed that in and took a policy out on Leia personally. So it was her own policy and then have been funding it with the resp money and then borrowing to pay tuition. And the point of that was that then there would be a big bulk for her so then I could use the rest of the resp money to do the same for each next child. So we're just rearranging the buckets, putting the money into the policy and then borrowing for, for school versus all of the money coming right out of the resp, paying for the school and it's gone the end of the day. If all three of my kids were to go to school, I 100% do not have enough money in the RSPs to pay for 12 years of university or college.

Get a copy of our new book, Don't Spread the Wealth. How to Leverage the Family Banking System to Own all the Gold, make all the rules and enjoy Generational riches. This book is jam packed full of incredible bonuses that we've put together, including our 15 page guide to hosting your own family banking meetings. Order your copy today using the link down in the description or visit don'tspread wealth.com that's don'tspreadwealth.com learn how to keep the money in the family so you can prosper together for generations to come. Well, this is a, I mean there's a lot to unpack here, Laura, and there's a few things that I want to, you know, really point out and iterate. So we're going to circle back to the, the residence issue that, you know, the, the putting off school this year for your, your second child. We're going to circle back to that. But so here's what we talked about. You talked about a cap of 50,000, the limitation on what you could put in. You talked about the, the issue that not everyone maybe will go to school, which you don't control. And then there's some, then there's who's going to end up receiving the money, who's going to pay tax at which tax bracket. There's potentially some penalties involved in the situation. Penalties if you over contribute, penalties if you, you know, there's a number of things that you itemize there and a lot of that we, you know, Henry and I talked about in our, in our previous podcast episode. What's really interesting here is what I'm curious about. First of all, you've done an amazing job doing, putting the money away, being committed to that, you and your husband committing to the education, committing to the thing that you wanted. You mentioned something before we hit the record that, you know, parents often have A have a fear of missing out for their kids. It's a fear of their kids missing out things. And I really like the way you put that. And so we'll often do things as parents that we will do for our kids that we just wouldn't do for ourselves. I know that, I've felt that personally and in talking to parents for the last 16 years, doing this type of work that we do, that's pretty consistent across the board. So we are willing to sacrifice things for the betterment of our kids. And that's a common trait with people. But we don't always recognize where sacrifice is, where, where it lives. And often in the financial circumstance as we're planning for this future event that may or may not happen that we don't have a lot of control over. We don't control the pricing, we don't control the tuition, we don't control the housing costs, we don't control the tax rules. There's all these uncontrollable things in this 20 year future of our, of our child going to some potential education institution. And then there's the, there's the action that we can do which is to put something away. But in most scenarios we're putting it into some form of, I'll call it a prison, a financial prison, because once it's in there, it's very different, difficult to liberate it out unless you follow the listed staccato rules that are in place in the government program. And so what you and Henry have worked out is a way where even though that's all happened in the past, you're able to now optimize that resource in such a way where you can create something brand new for your kids on top of the education and that is funding a, funding a policy that will allow them to have continuity of capital that will create a tax free death benefit on them that will grow and help their future family. So you're really checking a few, a bunch of future boxes that most other people don't even know exists. So there's so many things that you've kind of covered there. The question I have for you, and I want Henry to weigh in this in a moment, but the question I have for you is how does it make you feel when you look back in reflection? I mean, you've again, you've done amazing things, you and your husband here with everything you've put aside for your kids. But when you think now about the activity of actually planning and going through the university experience and helping your kids trying to do the housing and trying to do this and verifying what everything costs and trying to see what you have and the market risks that you're taking on. How does it make you feel knowing that there's all these restrictions in place on everything that you, you've. You've spent basically 20 years building?

Well, I guess I, I try not to think about that part of it. I, I just, I'm so grateful that I kind of solved my own problem by re. Repurposing the money that was already there.

I think if I had have found out about this after she graduated and you know, $80,000 of the money was just gone.

I think I'd probably be a lot more angry. I'm, I'm actually not the only, the only thing that, you know, Henry and I did a little exercise. I'm not sure if he was going to talk about or not, but I asked him to run me the numbers. If I had put the same money into. Into a policy when they were little instead of to an resp. That little exercise might not was a little bit, you know.

Definitely opened up my eyes. The money could have all of them and we only used, what do we use, Henry? Like $3,000 a year, right. Per child.

For 15 years or not even.

Right.

We just, we did it starting at age 5.

The exact same thing that you. I actually just mirrored the exact same thing as if you were to do the exact same thing except in a different location.

So, and so it just worked out the exact same using just that, you know, amount of money. And it would have been 100% accessible. No penalties, no surcharges, no piecemeal. I mean you can't even, I don't know, like unless you have a kid actually entering university, you actually can't pull out that much money. When they first start, they, the government wants to make sure they actually go to school. They are not just going to pull out their money. So up front, I think the cap. Now I'm not, I, I'm not 100% but I think the cap is somewhere around 8,000. But when you register for September you need like 13,000 if you're using residence and they don't let you pull another batch until your kids in school for like, I don't know, 12 weeks or something because they don't want you touching their money until they're already registered and going through some of the classes. So there isn't even enough money up front to pay the initial.

Semester one tuition. Semester one residence and housing and food and Compulsory fees and then some extra money for living expenses for them. So the parents are going to have to come up with more money anyway. Unless your child was lucky enough to have a summer job, which probably didn't happen this year either. You know, there's a lot of money upfront, and I wish I had have known about this from day one. I wouldn't have put any money into an rp. Or maybe I might have because, like, like we both said, you know, fear of my kids missing out, I might have put. But that extra money that I was putting aside into programs.

I would have redirected first into a policy also, like, like I was saying, you know, like swimming lessons, which is of all the things that we give our kids, should be free because it's a necessity of life. But swimming lessons alone were a lot of money. And my kids are heavily into sports, so, like my son, hockey, baseball. My daughter was a competitive dancer. Like, tens of thousands of dollars, it's all gone. Like I have to say, as a parent, we enjoyed every minute of it. We're still enjoying my son's hockey and his baseball. And when he's done, I. It's going to be a little rough. More so for my husband than for me.

But, yeah, like, if I could just encourage young parents just to redirect the money, I. I can't even explain the potential later on. And, you know, I was kind of going through some options with Henry before about my child. If she decides to defer forever, I don't know.

She might not want to go, like, what can I use that money for instead? But there's restrictions and some of it, all of the growth will be taxed. The government portion will be gone. So we'll basically end up back around 50,000 where I started, and.

And it'll be 25 years later.

Yeah, right. That money could have, you know, it'll definitely help hers have a start in life. But can you imagine what that would have been worth if I had put 50,000 into a policy starting when she was born 18 years ago? Like, I. I don't even want to.

Know the math, so I might have to show that for everyone. Maybe not. I don't know.

So, yeah, so I'm. I'm really happy that, like I said, we're able to take the money we already had. I'd already paid for two years worth of tuition when we started this, but I was able to kind of save it. You know.

Caught it in time, redirected it. And I have to say, like, when I look at her at age 30, because we started this at 20. Like, what an advantage she will have over the, you know, other average students. I'm not, you know, the other people will be in different financial situations or whatever, but just the average student who will be having student debt. She will have enough money easily for a down payment on a house. Just by the way, we've repurposed the exact same money that we spent years saving anyway. So that. That makes me. It makes me happy that we caught.

And one of the main things I just want to highlight is what is spoken. But I just want to just say for Laura's vantage point, I'm sure the listeners, you can really tell Laura really cares about her children and she really cares and is invested into their future success. She's not really. This is probably a parenting style. She's not saying they need to do this versus that. I mean, my parents kind of raised me a little bit that way.

But the main thing I want to highlight is Laura's very prepared in what she does. She looks into things. And these were things that were part of our conversations that we've had in general, that she's looked out further ahead in advance and she's done her education, done her research to learn about, hey, is there an alternative way or a better way of doing something? And that's what I want to be able to dive into, for everyone to actually visually see and walk through all of this stuff that we talked about, not specifically down to Laura's personal levels, but at a general enough of an understanding that everyone can relate to, because the more time you give this process, the better advantage you can. And I don't see any reason why people need to be penalized for. For that. The later you do it, then the later the outcome and benefits you get or the more deferred it is. And the key part I just want to highlight is Laura's very proactive in what she's doing. And it's such a great, awesome point that we're at to help witness that transition for people who actually want to experience what it actually looks like and see, because even using one very simple example, Laurie, when your.

Children, I would say your oldest, needed money to go fund her schooling and the other ancillary amounts that came with it, one was she got the restriction that would come out from, let's say, the respondents, but the way that you had things set up allowed the flexibility for you to fund it without additional sources aside from what you've already stockpiled and set aside. Am I Correct.

Yeah. And now because she has a summer internship, we use the resp money to pay the base premium. And then.

She'S not so happy about it, but I make her save a good portion of her income over the summer. And at the end of summer, whatever she has left has to go towards her edo. And then when whatever balance remains from that policy from the Edo, I will then again pull out from the resp, finish the top up on that, and then let her borrow her tuition and living expenses to until December. Take I just how much she needs for that, take a loan and cycle it back through.

I just want to point a very specific moment that you mentioned. So you do some planning with her to talk about how to keep money in the family, and that means you're taking some of the money and putting it into the fund that you've created for her. She doesn't like it. However, what I think most people don't realize is maybe you can explain to her what it was like when she got her paycheck and then what she saw from that experience.

Yeah. So last year when she started at the firm, she had gotten the form you fill out when you get a job asking if you have alternate income because it determines whether or not they take tax from you. So I told her, just check off no. So she got her full, her full paycheck. I don't know what it was. Let's say it was $500 for easy math. So when we filed her taxes this year, she had a bit of a tax bill.

So I took a policy loan to pay her tax bill. This was all the same money. So that's what we did to pay her tax bill. So this year when she signed her new contract in May, the same form came about. And I said to her, you better check off the yes this time. And she said, why? I said, well, remember last year you ended up with a little bit of a tax bill. So she said, oh, okay. So she, she checked it off and then she, she got her first paycheck. And she phones me up and she says, mom, I don't think my, my firm is paying me enough. I think I, I, I'm losing money. And I said, well, what do you mean? She goes, well, I came, I have less money than I did last year. And I said, well, didn't you get a raise or something? Then they gave you. She said, yeah. I said, well, you know, find your contract. So she finds her contract. And then I said to her, well, now you need to request a pay stub. So she gets her pay stub. She goes, I don't understand. I make more money than I have. Less now. And I said, yeah, because now you're being taxed. Last year they didn't tax you. And she, and the funny thing is she's actually going to become a professional accountant. She's in accounting. But these kids are so used to being under the threshold and not being taxed that when they actually get taxed it's such a shock to them and even to wait till they hit the next tax bracket and if they're lucky they'll earn enough to be in the top tax bracket just to give 50 cents away for every dollar they earn. But yeah, she, she wasn't prepared for the amount that they took from her.

And.

You know, maybe she won't get it, maybe she'll get a refund next May, I don't know. So anyway, that was a little, what.

A great experience though, a great learning experience for her and for you to have with her. Because that is an eye opening moment for people when they enter the workforce. And it is a surprise, I think, for a lot of individuals, young people, and then they get almost, you know, the, the good news is for her, she got to see the example before, without it and then the after. And I think a lot of people wouldn't see that necessarily, so they wouldn't have that same drastic impact. And so that'll probably stay with her for the rest of her life, especially as she pursues an accounting, accounting career. And you know, it's interesting when I look at, you know, some of the information you shared us, the spreadsheets and stuff you itemize the year, 1, 2, 3, 4, the different semesters, the cost of the basic tuition, the housing and the meals and so on and so forth and compulsory fees which are required. And I looked at the list of compulsory fees which have some very extensive names on them. The list that you provided is 48 compulsory fees that total up to this coming semester. $961 in compulsory fees which you didn't previously know about until your kids started going to university. And so when you add it all up, the total 4 year cost for your, for your daughter if, if she just sticks at four years is just shy of $87,000. Now that's an after tax dollar amount. So if she starts earning more and then RSPs come out and then she's actually being taxed on some of that growth as well. So it, so it just kind of further pushes things out and of course it's different May be different depending on the institution in Canada, depending on where you go. And of course our, our American friends in the south, they have some drastically different prices depending on the university you go to. Obviously if you go to certain types of universities, those costs, costs are going to escalate even further. But it's really interesting to put things into perspective. We could just round it up and say it's about $90,000 worth of, after, you know, worth of capital that's got to be portrayed over a 7, 4 year period of time. Tuition, the fees, housing, basic food expenses, that sort of thing. And so it's, it's really, you know, now you add that over three kids and it doesn't take us long to get to a pretty big number. You add some inflation on there. We might as well say we're at about 350,000 with some inflation added in just for three kids. I mean it's a, it's an, it's an extensive amount of capital.

It is. And you know, and I'm, I'm pretty confident most parents, if, if they can afford it, they're, they're happy to do it, right? They're happy to. But what if they could just do something else first? Right.

If I had, if I had a thought about it, you know, I mean, I guess I, I don't know the exact number, but let's say I put 150 over the years into three different RESPs. I think I stopped, I didn't quite put that much because I, I did learn at one point not to put, not to max out after the government finishes topping up.

There's no point.

But.

Say I put 150,000, well, that might get me one and a half kids through school, right. It's not getting me through three, so I'm still going to have to pay extra, going to have to come up with more money somewhere else. So, and that's was what I was talking to Henry, like I've been trying to explain, explain to some of my friends who have kids going to school starting in September also to redirect their resp money. And everybody's stuck on this fact. They're like, but I don't have any more money. It's all in the resp. And I said, I know you don't need any more. You already did it. You already did the hard part. You already saved for 18 years. It's there. You're just using the same money. Unfortunately, we're all starting 18 years too late, but 18, at least we're starting and if people could just understand to re.

Just. And it's hard. Like, I get it. I mean, I, I.

I'm glad. Like, I understand the whole concept, but it's, it's a hard concept to grasp at first because it's, it's so different of everything we've learned. Right? Like just put in the resp and pay for school and hope at the end of four years you graduate and find a good job. But anyway, besides that. Yeah, like, the money's already there. And I'm trying to say to people, you don't have to come up with any more, but I can guarantee you you're going to have to come up with more by fourth year. And in all probability your kid's not finished at four years, because if they do, they're probably not getting a job.

I know with my daughter, she fully intends to do more schooling. Like, four years is just the start. You know, she wants a master's or, I don't know, whatever they go into, but I know she's not done at four years. So this, you know, 87,000 is just to get me to four years. And I think if she does her master's and stuff, it's going to be another $30,000. So.

I'm saying to people, you've already, you've done the hard work, you saved, you put it in. So you got four years now to keep saving somewhere else. So take that money, repurpose it, and all the money you figure you're going to keep saving or that you've already maxed out, just repurpose that back into more policies or help your kids pay back the loans that they're going to borrow to pay for school. You're just regenerating those funds that are growing every day. And I keep trying to explain it and I don't know, everybody's stuck on this fact that they don't have any more money. And I don't know. Anyway, that's my, that's my story.

And I love that you share that, Laura. I mean, the challenges that we'll face typically is there's always this idea that when you put money into the tool of the resp, you're incentivized with that 20%. But, you know, I think this is the part that we just gotta dive into the mechanics and details. And I really want to maybe expand the conversation beyond what we've actually just talked about just for post secondary because, because you actually made a really good comment before we started this that I didn't think about until you raised it and I want people actually experience it. So I'm just going to share my screen to walk through a little bit more of a holistic process because we dove into some things and this is again just for fun and for people to just relate to some of the conversations we're going through and just get into a context of the kinds of I'll say great discussions that I get to share with Laura. And you'll see right at the beginning, at the top here is right at the beginning when you start this process, your child is born. And there's steps that a child goes through in terms of the development, like infant development, toddler, pre education activities, adolescence, post education planning. So actually the bulk of what we ended up just talking about was all just focused on this component. But what about this component? And then there's another part here where it's adulthood and you'll see I blocked it off. But there's a whole other component there that's really just lost sight of discussions because I get it, everyone's day in life has been so consumed with what's going on.

The chance to see the forest within the trees is a little bit harder given the day to day firefights, developments, moving, going here and there. So I think this is where I just kind of wanted to just start pinning down specifically the things that we talked about so that this can all be seen related to it. So like when a child is born, I think Laura, you've shared right from the get go. If it's a hospital birth, they typically will even get forms related to. Let's start setting them up with an resp. That's the path that everyone's used to.

Seeing you get them before you leave the hospital.

Exactly. So you know, these are, these are components that is already set up. You know, good or bad, it's. It is what it is that's there and. But I'll just share from how I was raised, I'm sure how both of you parent your children are different too. But for me, when I was going through my development, I actually enjoyed playing piano first and I actually had someone come into my house to show me what music music was like. And I really gravitated towards music. So there was things like music that I gravitated towards and this is a little bit of a cultural thing, but I actually started doing math in Chinese school too. So there's all this other schooling that happened. And you know, Laura, you already mentioned earlier there was some additional schooling that your children went through. I'm sure Richard, you had that too, right?

My schooling was on a farm, so it was a little bit different. It was around building fences and throwing stacking hay bales.

And Laura, your children went through, I guess, like dance school, swimming.

Yeah. My girls actually were in French school.

Because I wanted them to have an opportunity to be bilingual.

That was expensive.

Dance school was very expensive. I make a joke, you know, being Canadian, everybody talks about how expensive hockey is. Hockey's got nothing on dance.

You know, costumes need a new outfit for every, every. A new costume outfit for every, every.

You can't reuse them ever. Yeah, new shoes costume is like at least $250. Like. And my daughter was at a very high level, so there was a lot of costumes, never mind choreography fees and travel fees and then the, you know, if they're playing high level sports, there's all of the out of town tournaments which are, you know, the fun parts of it all. But each time you're going out of town, you're, you know, five, six hundred dollars in hotel fees and then you're eating out three meals a day. And yeah, like, school's the cheapest part of raising kids.

So. So that brought into perspective why my parents didn't let me play sports.

And so I mean, and I mean that that was just new for me to learn how much it costs to help develop, let's say your daughters towards dance or the activities and you know, farming also you may not have, I mean, the lessons that you learn out of doing all of the things that you do there. I wish right now I'm actually learning a lot of stuff related to farming towards that too. So. But you know, the, the process that started it was that from a child that's born is put into resp. And like Richard, you were talking about the money gets essentially trapped in prison in here. And this is kind of the part that we just wanted to expand the discussion to highlight that there's another way of doing things with the same discipline in what was already being done.

I feel like we all get caught up in the government portion. Everybody, oh, it's free 20%. We're also caught up on this 20%. But at the end of the day, I mean, the extra $5,000, 7,000 maybe it's. Is it really going to impact whether or not they go to post secondary education and whether or not you're gonna be able to afford it?

Well, and here's an example I would throw in there, and I mentioned this, you know, earlier on, before we hit the record button, you Know, I, last year I bought some artificial turf for our yard and I needed to do that for, to improve our quality of life are so that my kids could actually play in the yard. It had kind of been destroyed by some dogs. There's, you know, it was uneven ground, easy to like hurt your ankle for, you know, playing soccer. The kids didn't even want to play soccer in your yard anymore because of how bad it was. So we made some improvements in our yard and those improvements have drastically increased our quality of life. It was an expensive ticket, but you know, over the course of 10 years it's not. And I use policy loans, in fact, some of which came from policies I have on my kids to help initiate that. Now I'm repaying that. In fact, the money's already been replenished back into the system. But if that money was trapped in an resp, there would be no way to access that. So all of the memories and all the quality of life opportunities over the next decade with my kids that this, this scenario of artificial turf is creating already creating would not have been able to exist if I didn't have access to the resources. And so the policy system allowed access to resources where an resp simply wouldn't have.

And on this left side, I'm just showing this is that conventional path that everyone's seeing and there's that flexibility that's coming in. And again, I just want to remove this just to even show on the resp. So here's the resp that we're talking about as it relates to, let's just call it the container. And I've just unpacked the pieces related to it, the contributions that the parent puts in, there's the market gains and losses that happen and then there's the government's portion that everyone gets very hyper focused as it relates to the amount of money that's going in. And once the money is going inside, obviously it's getting divvied up. Now, you know, Laura, you already made the comment that 36,000 is roughly the max that you will maximize the government's 7200 grants benefit. But let's talk about the prison that is created because the money's inside of this location over contribution 1% per month until it's repaid. If the purpose of the funds is not going to be used for what you want to use it for. The two components as it relates, the main component as it relates to the market risks, as the gains that you have gained, there's that amount that you would Withdraw, Laura, goes into your income at your marginal tax rate and we'll just say for simplicity's sake is 50%. So 50% of that is gone. And then there's an additional 20% penalty on top of those gains that you would have put in taken to it. And then there's that component right now that people on the surface see the 7200 but they miss the second criteria that there's a series of approved conditions that have to happen in order for that 7200 to be eligible to be actually used. One is it has to go to the post secondary that's approved. What about if it's international, that's not improved from there? What about all these other components and those restrictions? So all of these components here will impact that benefit. So just in the context of all of these wonderful things that people will say, oh yeah, I get a grant, that's free money. But now in your oldest situation, she's paying extra taxes because she has to go through that. And if schooling is 90,000 over the four year duration and the max is 50,000, that's a pretty big and long Runway that has to be created. 40,000 more. Where's that money going to come from is the most important question that I usually love to put into parents eyes when they say I don't have the money. But I'm like yeah you don't. But the way that you built it right now you also won't too. So let's kind of repurpose that opportunity that we can. So the other component I just wanted to dive into is using that as the example that So I had 24,000 for your oldest is education and we were talking about 80,000. So that actually worked out roughly about the same numbers given the range the type of schooling you go through. So you can see the whole program and participating in this program, if the amount is 50,000, give or take, whatever gains and losses you can get in, plus the contributions from the government. If that's the case, there's still a significant shortfall that ends up coming into it. So how does the shortfall get filled? The shortfall gets filled by going through financing. And where does the money come from? And usually a student's choice is to go through the education, sorry, the process of getting student loan or getting professional, let's say lines of credits and otherwise it has to come from the parents again. But this time they couldn't put more money in. So where would that extra money come from? It has to be coming from somewhere else, from their pool of their capital. And so that's where I just wanted to show.

When you're borrowing money from the government, I just ran through the same situation. For the oldest situation, the amount of loans that estimated, again, everybody's situation would be different. They would only get 4,000 out of the existing resp using the same resp money if it was maxed out in the way that it was. So because Laura is doing such a great job preparing for children for that post secondary, that's actually going to impact how much that happens from there.

So that that's in reference to how much they could, they could add from a student loan perspective, given all the conditions, if they had a maxed RSP because of what's available, it reduces how much they could top up if necessary. So if they, if they elected an educational institution that was, you know, some, you know, a more expensive Ivy League school of some kind of, where the costs were even far more extensive than what we've already discussed, they would be severely limited to what allocation of capital would they would be able to tap into because the RSPs wouldn't be sufficient and what they'd be able to access in a student loan scenario just wouldn't be. So they have to do some other additional borrowing to, to make that make up the gap. Is that correct?

Borrowing are other sources of funding that has to come from somewhere. And then just the last component on just this slide, just to share is, Sorry, that was just the calculation on the penalty. And we can refer that back to the previous episode where we calculated the impact on the penalty. And let's say if Laura's income was 100,000, that would have been an extra incremental tax of 12,000. So the economic value in someone participating, putting their money in this participation of this program or process really leads to question whether it's something that you want to participate in. And it's not to get emotionally, you know, just to get objectively.

Evaluating the situation that this is something that's worth participating in. Just because someone offers it to you doesn't mean it's something that you take right away. If someone offered me food off the street, I don't know if I would take that. So there's a different consideration that just want to empower everyone who's listening onto this situation and the context related to it.

Well, the idea of food off the street isn't that far off. When again we circle back to literally you're leaving the hospital, you've birthed your firstborn child and they hand you A stack of paperwork. And in there is basically resp. Paperwork to fill in. And it. It again, the nice thing is it gets parents thinking about that future endeavor, which I think is. Is appropriate. But there's no context to alternatives. And I think that's the direction that we're going to pivot to here next, Henry, is how do we assess and understand that there are alternatives? And I think that's really a core element Laura here has discovered through working with you directly that she can implement alternatives now, even though she's at a stage where her kids are already going through this experience.

And this is the part that, you know, it's a lot less on the what. Right. So obviously we used a very powerful tool which is a properly designed whole life insurance policy. And it's not just any whole life insurance policy that is designed, but there's components that relates to it. And the. It's just a vehicle. It's going to do its thing. It's actually what Laura does with it as an. That actually makes the magic happen. If Laura doesn't treat the vehicle with respect, it's not going to do its thing. But Laura has done a lot of things creatively with it, might I add, and I think she's brilliant. And I actually want to use this as the example to wall.

Discussions that we've had. And I wanted to show so, you know, in the very similar examples, and this is just straight from our previous recording, that starting at the same age, actually, Laura, your children, as you shared with me, started at the same age too. And so we get to benefit from hindsight if that were to happen, what it would look like. And so it's actually the same amount that I used that same design. You put in the exact same amount that you would generally put in to benefit for the maximum government contribution. Well, that's the same about that, you know, 42,500. But what is the asset that's created that can be tapped into at any point in time without the restrictions that the alternative path has provided? This is what's available. And this amount, I mean, Laura, your economic situation today is different than what it would used to be. But when we talked about setting something up for your children, who set that amount, you or me?

I think I did. I think. I think I said to you the. This is what I got. Figure it out.

You asked me to help figure it out, however. But most of that came into. You're. You're not at least capped or restricted to 50,000 as it. As opposed to the governments now I mean, I'm illustrating here as an example, at 22, if you decide to stop other people, I mean you can decide to stop, you could decide not to stop, but you at least don't have the restriction of any future penalties. You don't have any restriction to fund it anymore if you don't want to. But I'm sure the benefits in what you see, you're going to continue supporting them in the ways or they're going to continue supporting themselves in the ways that they have because this program doesn't end or this process doesn't, doesn't end as it relates to this component that we've built. In.

Another thing I was going to say. Sorry, I'm just going to interrupt you quickly. The other end of that, which completely off topic from school is, you know, their death benefit has already been started so young and at the end of their very long life, the legacy for their great grandchildren is going to be immeasurable. Right.

Like was there any benefit, the previous process that you had participated?

No, no, no, there wasn't.

You would have had a taxable account though.

I did have a taxable account. And yeah.

Well on that note, I want to touch on that and I'm glad you brought it up, Laura, because you know, in this day and age and, and, and thinking about your kids into the future. So in the statistics around things such as like cancers and critical illness, events that are happening for people is happening at much younger ages. You know, literally last week I, I got messages about a well known entrepreneur, a fellow who founded a great company. I literally had received his book about two weeks, two, three weeks ago. And last week he passed away hiking with his family at age 42. Still don't know why. And recently another gentleman that I know out of Edmonton, wonderful man, he passed away at about 48. Again, circumstances a little bit unknown. So these things are happening, people developing cancers. I just had another message literally this week about another person that I know close to me who's developed breast cancer. And if they had insurability in place then and convertibility in place, there's things that they'd be able to do, options that they have available. And so by instituting this for your kids now you're locking in that insurability. And you know, I know in the last three years I've probably had somewhere between five maybe six kids under the age of 18 that were denied coverage based on certain things. Sometimes they were behavioral oriented things. Maybe it was certain medications that they were on top of type, you know, risk of type, type 1 diabetes, these types of things that could cause an issue. And so you never know what could take your insurability away. But if you already have it, you don't have to worry about it. And so by instituting this for your kids, there's all the benefits, all the, all the things that Henry's discussing here and these are beautiful graphs but there's all the unseen benefits that we can't even imagine because we've, we've taken the initiative to put something of permanence in.

Place for our children and, and you know, the, just to extend on that this is a permanent death benefit that's set aside and it's contractually to be paid following this process. And I think the most common thing that I'll usually hear for depending on people where they are in their journey and financial journey, they'll share that they don't care about the death benefit and all their focus is on the now. I think one of the main things just to share is Laura, we're actually focused. We were always just talking about the now and into building up to the current future. But Laura, you've done a really great job setting up the responsibilities and the continuation of things beyond just.

Focused on the now, focused on just what that is related to the previous path of things. This sol. The. The same amount of money solves a multitude of problems that can exist for a family. And definitely when people share to me I don't care about the death benefit. I don't think they really understand and appreciate the value of the death benefit.

Yeah, well, I mean now that, because we doubled Leah up when we started hers, you know, this is her own policy I'm talking about then you know, we're planning for the next one but because I can really only use hers as an example, I just, you know we hit the year three of the premium a few months back and got to actually see the dividend payment because we kind of didn't see it the first time around. It was sort of hidden in with the double, the double two years at one sort of thing and you know she had a seventeen hundred dollar dividend. That to me is where I kind of see the magic. I understand the benefits of the now too but when you, when you see the change in the death benefit just from a dividend that's, that's where you.

See some extra magic that gets even better when you're, you're very clear on the fundamentals that the dividend or the, the death benefit is what forces cash to accumulate and cash follows the leader. And so as that death benefit is increasing, you're creating a guaranteed future cash flow because the cash value must follow to equal that future outcome. And that's, that's creating perpetual motion on all those dollars. And you talked about being an honest banker earlier. You didn't use that language, but you said to other parents, they're already spending the money, they're already putting the money in the RSP or they're already putting the money into these, these, these programs, the hockey, the soccer and all the things for their kids. What happens for people when they're done doing those things is all that money starts to pile up and then it finds a way to go to doodads. Oh my quality of life has changed now. And they're not committed to using that dollar to some other financially beneficial area of their life. They're just like, man, I can't wait till I don't have to pay for hockey or dance or resps anymore. Man, our life is going to be so much different. But then what ends up happening is the resource of that committed budgeted money starts to find other holes to, to fall into. And it's never being generally like very focused in its efforts. And that's something that you are doing. And I think that's an important lesson. You're, you're being an honest banker with the capital that you've been working with for the last 20 years and you're committing it to pursue things forward even further.

Yeah, I, I'm just going to add that money and how we design the policy, the dividend and the, let's I'll just call it the paid up additions. That extra money that goes into the policy buys increased death benefit. And that's how more money gets set aside, available to tap into in the future. And it's just the same process that everyone's doing. But this amount of death benefit just keeps going up and gets larger and that leads to the more amounts that can really be tapped into. So, and, and with good leeway of timing to do it. So everybody's journey and how when they come into this.

Episode that we're talking about is going to be different. Their stages are different, but the process and what is being set aside and done is going to be the same. And that's why working with someone who knows how to appreciate the journey that you're currently on and how to carry and help guide you to that next component. That's what the coaching comes in and the part that, you know, I want to now Just talk about is where people are in the current situation and they've built that post secondary fund in the conventional path. And this is where Laura, your second or your third child may have different opportunities show up in their life and maybe they decide not to pursue that post secondary education. And.

The money, if it was built differently, what opportunities would you have used the money for? Because I thought this was actually amazing in what you shared.

Oh, about buying a business.

So.

My children started struggle to find part time jobs now. So I was trying to find alternate ways for them to earn money. So I thought why don't you buy an online business? I mean you can go to different websites. I won't name them because I don't know if I'm allowed to. But you know, there's all kinds of people selling these quick little businesses, their drop ship businesses, whatever. But you could buy a business for say a thousand dollars and it might only generate $25 a month in income.

But I said to my kids, you know, I would loan you the thousand dollars to go and buy and take over this business and run it. And if you make any money at the end of the day, you know, you got to pay back my loan, but whatever's left, it's all yours. And one of my kids said that I was falling into an online scam.

No such thing. And the other one just kind of rolled his eyes, you know, at me, whatever. But I thought that was a great idea. So I'm thinking if my children decide not to use this money to, for further education and I've used as much of it as I can for the other one who is using it for education, then why not take what's left and have them find a business that's already running? Because starting from scratch can be, can be pretty hard. Find a business that just generates enough to pay the loans or whatever and go with it. And my thought process was at the end of the day they're going to learn more doing that than they'll probably learn in a 4 year undergrad degree anyway. Like imagine the experience of your parents being able to say to you, here's $5,000, here's $10,000, go find a business and try to run it for four years. Worst case scenario, it tanks. They still got an education out of it and you know, probably more so than anything else. So anyway, that was what I was saying to Henry, that if my kids don't use the money for school, then I would like for them to use it to do something else.

They could travel if they wanted, but they're not using it all for that. Something that's going to try to generate an income. And that was, that was just my thought process on alternate uses for the money. Unfortunately though, they'll lose the government money. I'll lose the money I'm going to have to pay in taxes because I have to claim it.

And so I'm kind of hoping they all at least go for one semester so I can pull out the government portion. But that was. If the money wasn't tied up in an RSP and it was just available in a cash value, then, you know, the opportunities would be limitless on what they could use that money for. There's all kinds of businesses they could get into or other interests, maybe abroad and helping out other, you know, less fortunate people. I don't know, lots of different things they could use that money for versus just education. Because I, I see nowadays education is not enough. It is not enough to, to get you where you need to be. Doesn't seem to, I don't know, that's what I see. I, I just, I think that we've gotten ourselves into a bit of a situation that, you know, a four year undergrad isn't, isn't going to help you do anything of value you in the world.

There's a lot of positions that people have traditionally gone to university to get a degree in that may not even exist when they come out or shortly thereafter. So I think that is at the pace and degree of change that we're seeing with things like artificial intelligence and just the pace of technology and the types of work that traditionally has been available. Many of these types of roles and ideas are shifting and changing and the marketplace may not have the same number of positions for people coming out into that environment. And I think that's part of the risk that people are facing in an education environment. Now. My personal belief is that things like trades will probably be out for a much longer time. I don't think that they've developed the dexterity that robots need to turn a screwdriver yet one day they might get there. So there's, there's certainly aspects like that. Granted being a trades guy, I always, I always, you know, come back to that to some degree. But the, you know, in your example of a business, one thought process I would, you know, put in there is, and this is something I thought about years ago myself. I'm a recovering electrician by trade and when I realized, okay, so this was a four year scenario to complete that apprenticeship with work hours and so on. Whereas I could have been a welder and maybe done it in about three years. And had I known in advance that if I was a B pressure welder and I could complete that testing, certification, I could have actually bought a truck with a. With a welder on it off of a used one, off of a guy who maybe was retiring, getting out of the business. And as soon as I got my ticket, I could have been operational on oil field sites. And then. And then I could have, within about six months to a year, I could have bought a second truck and hired another welder. And I could have been optimizing in that way. And there, like, I saw a lot of people doing that when I worked in the industry. And I thought, man, that's phenomenal. That, that opportunity I didn't recognize was there for me early on, but capital from a policy would have allowed me to go and initiate that purchase to, you know, be able to make, you know, 150, 200, 250, $300 an hour, depending on the situation. So there was a way of looking at things that wasn't clear to me in my youth and no one had talked to me about. And that's the opportunity as a business owner that you have. Your kids may not take over the family business, and so you may not be able to transition it the way that way you might have to sell it in the open market, but at least they'll have that option and you'll have secondary options available for them. So at the end of the day, the best we can hope for is to maximize and create as many options as we can for our decision making. Would you agree?

100%. It's all about the options.

And.

Yeah, like, my business is in the trades, you know, and it's actually funny that you mentioned the trades not having to be too concerned with AI just last week. Henry doesn't know this one story.

I had a young gentleman come into my office who was teaching me about a new software that I want to purchase from, run my company, not run my company, but to help run my company. And he showed me how they're using AI. And I was like, wow, like now I might not need to hire another person to do this one task, because this software is now going to do that for me. And I was trying to figure out how is the trades industry going to use AI, but they're not using it to do the actual installations, but the AI technology just to communicate with the customers and take orders and all of that stuff. I just, I didn't think about it. And so I actually, I'm taking an AI course right now. Not because I think that I need to use it right away, but I just don't want to be the last man standing not knowing how to use it. So. Yeah, so it was just funny that you said that, you know, about the trades, because there are other ways that AI will take small jobs away from people.

And run them more efficiently, and even businesses that like mine will have to use it.

Well, a piece to add to that, Laura, is that, you know, again, in a trades environment, just on that topic, things like maybe managing inventory, placing orders, communicating, like you say, communicating with clients or customers, or maybe analyzing blueprints, maybe making recommendations on planning, the, you know, the Gantt chart of the project, all these types of things that are time consuming and require some human oversight, those could streamline and minimize time. And so now the same person who is the journeyman who should be out, you know, doing work on the tool somewhere might have another five, ten hours a week to go and do more of that. And so the amount of work they're able to do because they're not having to do all the minutia could create some expanse in their business potential. And I think that's where you're going to start to see a lot of the impact, at least in a trade environment for, for people to see more, more options. And again, they might minimize the amount of work they need to hire outside of the, the actual trade activity that they need to be conducting.

Just so the, the main point is, as you both have shared really well, is to have ultimate options of flexibility in your hands. And if you're using a tool that is rigid, fixated on a process, but you're applying the, the discipline, you're applying the resources, but you're restricted, that kind of really does basically limit your option. I mean, just, I mean, just to kind of go over the difference of it is life in terms of development from being born all the way to, let's just call it death, there's going, everyone's journey and cycle is going to be different. How you go about doing that process is what sets everyone actually out very differently. And the main component I just want to just bring in back from our previous podcast that we shared using the same tool that we help our clients with is here's the difference in what it looks like on just thinking differently. When the pool of capital initially up until age 22 that went in was 42,500, and if no more money went into it, because the asset is now self sustainable and it's well taken care of, that amount still is going to increase up to age 40. To have this pool of capital that doesn't have to start from scratch all over again. As in the next cycle is marriage, the next cycle is children, the next cycle is housing, whatever that cycle and order it is. But at least what doesn't change is the momentum that was already kick started. And in Laura's case that would be the same situation for everyone else. If they start early or even if they start right now, that still doesn't stop that process and momentum that happens and exists. And if we carry it all the way, that legacy of that same 42,500 because of the contractual guarantees built into it, that's a 2, almost $2.5 million. Just by doing something differently. I don't see the same conventional program and process having that same continuation factor to lead all the way to age 100. And just kind of contrast that very clearly for what was needed today would have been let's say 59,000. And if no more money went into it, it doesn't matter. That asset has the ability to continue to increase up until almost that 2.5 million. And there's no concern or worry about market risks or the last 13 days of suddenly watching that fund that you need to tap into to pay for post secondary education suddenly go down. There isn't that same amount of the headache that exists for that whole situation.

I mean at the. The main thing I just wanted to share was I really appreciate having Laura come into this situation to share her experience. And it's really because I think this is where I'm sure Richard, you can relate to this. It's not the first time we've heard. I wish we started this process earlier or we knew about this earlier. It's the most common thing we will hear about at every single meeting that I'm in. I will usually hear that. And that's why we want to just have this chance to have Laura really express the chance that you don't have to go through the same mistakes or differences and challenges following that same path that had that was there. Use her experience, learn from experience, the experience that she had gone through. I get the opportunity of working with her in her current situation to take advantage of opportunities where it is because there's a narrow window that we talked about as it relates to how we can tap into the resps and working with that. And that's what we work with in that situation too. But most of it is, let's prevent that situation by starting earlier where we can.

Yeah. Amazing. Laura, just so grateful to have you with us here and I'd love to give you a chance to have some final thoughts on your, your university funding experience and, and then the change that you're making now, what has you hopeful for the future and, and what would you like people who are listening in to, to know and take away?

I guess like I want parents who are parents with, you know, young adults like me. I don't want them to regret putting the money in the resp. I don't want people to live like that. I just want them to think, think before they give it all to the university. Think about, you know, there's an opportunity here that we can all take advantage of. We can redirect that, fund those funds first. And you know, the worst case scenario, like Henry knows, my worst case scenario is that you use all the resp money to fund a policy for four years. At the end of four years, you, your kid can't get a job, won't work, whatever, there's no money left, nobody can fund this policy. There's no money. So the policy lapses. Well, you still got a four year degree and you got no money.

So worst case scenario, you end up in the exact same spot. But I mean, as Henry, you know, said to me, there's always ways around it and as a parent, I know I'm still going to have to help my kids, so why wouldn't I want to help my kids? Just keeping the policy alive, bare minimum, whatever we can do to keep it going, keep that death benefit growing, keep the cash value growing. And then, you know, one day they will get a job and there'll be an opportunity for them to repurpose their after tax dollars again. They'll have all that space to fill back up. They've got that loan, they can put it back in, they can reuse the money like the opportunities are endless. So I want parents who've already done the RSP planning like I did to actually be proud of themselves. The money's there, use it, start fresh contact. You guys set up the best case scenario and worst case scenario, you still end up with nothing. But you got a four year degree, but that's not where it's going to end. Right? And that's what I, that's what I hope for, for the future. That other people hear this and they think, wow, I've actually got 50,000, 60,000 depending on how many kids they have and, and get as Big a policy as you can on the first kid, then you can borrow from that one to pay for the other kids if you have to.

That's, that's what I did, you know, like my first one will have a big. Has a bigger policy than the other two, but not because I want her to have more money. I just wanted to get as much in as I could and have as much space to pull out from the resps if my other kids don't use it or whatever to dump into hers policy, which even though it's in her name, I see it as a family bank. It's not really hers. It's in her name, but that's just because we need to put in somebody's name and she was the oldest, so it got to be her. But that, that's, that's what I hope for, for the future, that people are proud of the money that they've saved and can just get in before it's too late. Not that it's ever too late, but the sooner the better. And, and be thankful that the money's there to, to start something off. And yeah, we missed the first 20 years. Well, we got to make up for it now. So that's, that's what I like to say.

Awesome. Well, I appreciate that, Laura. Thanks again for being with us. And you know, again, your, your real world experience is what's going to help others start to see and visualize a world that might be different than the one that they're operating in presently. So we're just eternally grateful for that. And for those of you, of course, watching on YouTube, you'll see that magically, there's another recommended video that just showed up and you should probably watch it because it's really good content. So with that in mind, thanks everyone for joining us today and we'll catch you next week.