In 2004, we decided to set up an RESP for our daughter (our first born) who was just about to turn one years old. We heard about CEFI during our stay in the hospital when my wife was delivering our daughter. It's the first RESP company we heard about. You can't miss their flyers and their ballot boxes that encourage you to give your information out to them for a chance of a free scholarship for your child. When you are excited about having your first child alot of things flash through your mind. Education is one of them. So hats off to the marketing team for CEFI, they have their claws in there on the first day of your child's life.
My wife and I decided to call CEFI and get some more information about their program. I guess the reason I called them was that they were offering a nice little bonus through the governement. If you spend $500.00, the governement will kick in $100.00 as a grant. Great deal! Well folks, every company has access to these grants so don't get lured in like we did with that incentive.
The local representative was really nice. She came to our house, at our convenience, and was very friendly. We joked around alot. She asked about our family. After 15-20 minutes of getting to know each other and gaining a feeling of trust we started looking into the program. Since this was our first time at this sort of thing, we had a lot of questions... I mean lots. I felt that she did a very good job at explaining everything. We were excited and felt that this is who we're going to sign up with. STOP RIGHT NOW! Our mistake was that we didn't research other companies or banks. We felt that since the Canadian government helped sponsor their program with the grants that this was top notch organization. Don't make the mistakes we made, check out other companies. We were nieve and I blame myself for this... no one else!
We were getting down to the fine details of the plan with projections of how much we should apply to the plan each year. I explained to the salesperson what our situation was. We were thinking of having another child and my wife was going to go on maturnity leave for another year so our finances would be a little lower than normal. However, my Father had passed away 6 months before this meeting and he had a life insurance policy taken out and I was one of the benefactors. I explained to her that we had $4000.00 to put onto the policy but that we only wanted to put $2000.00/year for the first two years for a couple of reasons:
- $2000.00 is the maximum limit for the education grant provided by the government. They would add $400.00 to our contribution. If we put $3000.00, we would only get $400.00. We felt that if we split the $4000.00 than we could get an additional $400.00 the next year. We thought we were pretty smart with that kind of thinking.
- We informed our salesperson that after the 2 years there was no way that we could maintain the $2000.00/year. With my wife on maturnity leave and a second child and only one income, there would be no possible way to contribute that much. We didn't feel that we could continue with that much even if we didn't have the second child and my wife was bringing in a second income. It's just too much. We also foresaw another education plan for our second child as well and it would be impossible to create two funds with the first one being $2000.00/year.
We explained our situation to her, in hope for some advice. She showed us a few of the possible situations that we could do and ultimately we went with taking my Father's life insurance money and paid for $2000.00/year for the first two years and then after that we would have to reduce that amount to $500 or $1000.00/year. I asked if we could do this and she said no problem. WELL THERE WAS A PROBLEM WITH THIS! (I'll explain later).
SIDE NOTE: I don't know how the salespeople are paid but I'm sure that there is some sort of commission payment in relation to how much their clients sign up for.
THE PROBLEM:
We paid $2000.00 for the first two years to give our account a total of $4800.00. Great start to the program. However, when I called to reduce the payment to $500.00/year on the third year of the program (as my Father's life insurance policy ran out and we had a second child and only one income), the representative of the company warned me that it wouldn't be a good idea as you would lose $2200.00 of your policy (more than half than what I paid into over the two years). I COULDN'T BELIEVE WHAT I WAS HEARING. I told the rep that I had no choice. I didn't have the $2000.00 and the only payment I could make is $500.00. They then informed me that my daughter's policy would lose the enrollment fees for a total of a $2200.00 loss.
After the call, I immidiately called the salesperson who sold me the policy. The person who assured me that it would be no problem to reduce or increase your annual contribution. Sure enough, she had moved to Newfoundland! GREAT, I was left holding the bag.
From this point, I sent a number of emails and letters to the Children's Education Fund Inc. They suggested that we update our account to $2000.00 and that they would only charge the interest that would have been gained along the way as well as a modest service charge for their efforts. Well, we looked into it and realized that even if we gained the funds for this year's payment, we just couldn't keep up with a $2000.00 payment each and every year.
I then suggested that they take the $4000.00 that I contributed over the first two years and readjust the interest and spread that amount to 8 payments of $500.00 over the next 6 years. In fact, I told them that they could keep the interest. THEY WERE NOT INTERESTED!
My last ditch effort was for them to simply return the money that I had contributed, nothing more, nothing less. They could keep the interest they made on our money, I just wanted out and the money that I put into the plan to use with another company. NO, was their reply!
So right now, I'm currently locked into a plan, that I don't want, have lost most of my investment and can't even get out of it. Each year since, I have paid my annual $500.00 with no enjoyment at all (an understatement but a polite way to put it).
DON'T MAKE THE SAME MISTAKE I DID:
I failed my daughter, I will not do the same with my son. I strongly encourage you to do all the research on your own. Don't trust what one of their representatives tells you. Find your own answers, call other companies (they have similar government grants) take as much time to set up your fund as you need. There are much better deals out there with less strings attached.
Over the next week, I plan on submitting the letters that I sent and received from CEFI. I'm not making this up. It's a bogus investment that has partially robbed a quality education plan for my daughter.
