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The RESP Strategy

ABC Stocks asked me to post about my RESP strategy. As mentioned in my post on “Having a Newborn – Getting down to business“, I plan on opening a TD e-funds account (non aff) and buying cheap index based mutual funds.

Why TD e-funds?

What I really like about the TD e-funds setup is that they only offer low management expense ratio (MER) index funds. This is great for the investor who likes to “do it yourself”. Why not buy ETF’s instead? As I plan on putting small amounts at time, index mutual funds are cheaper than purchasing ETF’s via commission. In addition, the TD e-fund MER’s are so low that they are comparable to the MER’s on ishare ETF’s.

The Strategy

We’re going to implement a global couch potato based strategy where the RESP money will be split between 4 index funds and rebalanced on an annual basis. The 4 index funds will consist of:

  1. Canadian Equity
  2. US Equity
  3. International Equity
  4. Canadian Bonds

As for the actual percentages of each stock, that will change as time goes on to reduce risk and volatility. Lets assume that the RESP Plan will start withdrawing on year 18:

Index 0-10yrs 10-14yrs 14-17yrs 18yrs +
Canadian Equity 30% 20% 10% 0%
US Equity 30% 20% 10% 0%
International Equity 30% 20% 10% 0%
Canadian Bonds 10% 40% 35% 0%
GIC’s 0% 0% 35+% 75%
Money Market Fund 0% 0% 0% 25%
  • As you can see, from years 0-10 (Growth), the equity portion of the portfolio will be aggressive to hopefully maximize equity gains over the 10 years.
  • Moving into years 10-14 (Balanced), the portfolio takes a more balanced approach between equities/bonds to reduce risk without sacrificing too much in returns.
  • In years 14-17(Capital Preservation) is nearing withdrawal time, which means that capital preservation are among the top priorities. To do this, most of the portfolio will be in bonds/GIC’s. The equity and bond allocation will slowly be reduced to 0 over the three years while adding to the GIC allocation.
  • Years 18+ are the withdrawal years which means that capital preservation is the top priority which will be achieved via investing in a GIC ladder. This will allow money to be available every year that the child is in school. The annual lump sum will most likely be kept in a money market fund until the money is needed.

There is some planning to do with regards to the timing of the GIC ladder, but this is the general strategy. How does my plan look? Do you have any suggestions?

If you want to do some more reading on the TD e-funds, Canadian Capitalist also has a ton of information on them.

If you would like to read more articles like this, you can sign up for my free newsletter service below (we will not spam you).

FT About the author: FT is the founder and editor of Million Dollar Journey (est. 2006). Through various financial strategies outlined on this site, he grew his net worth from $200,000 in 2006 to $1,000,000 by 2014. You can read more about him here.

{ 72 comments… add one }
  • Traciatim May 1, 2008, 8:20 am

    Wow, that’s almost exactly the same plan I have with my son (3). My daughter we got suckered in to CST when she was born (6) while I was younger and a little less savvy in the way of the finances. CST was a terrible mistake.

    • FrugalTrader May 1, 2008, 9:31 am

      Traciatim, i’m glad to hear that I may be on the right track! Do you have any suggestions for improvements in my plan?

  • moneygardener May 1, 2008, 9:33 am

    looks like a pretty solid plan to me…

  • Cash Instinct May 1, 2008, 9:50 am

    Do you consider that you have to use all the money accumulated in the RESP for your children’s education?

    If you try to maximize the free money from governement for RESP, you might end up with “too much” money in your RESP (depending on the choices made by your children about the type of studies, how much % you want to pay, etc.)

    You could use the free governement money and growth from the portfolio (which are taxable in children’s name) and get back the capital in your RRSP (if enough contribution room) after the education is completed.

    In other words, do you really need to be 0% equity after 18 years+?

  • MoneyMusing May 1, 2008, 11:47 am

    Hey MDJ,

    Just a few short months ago I opened a TD eFunds account and funded it in a similar fashion, albeit for my retirement as opposed to RESP. I altered the index picks and replaced the US Index fund with the European one. The US still scares me a bit and the EU is only getting stronger as a union.

    30% International
    30% European
    20% CDN
    20% Bond

  • Cash Instinct May 1, 2008, 12:01 pm

    Isn’t International similar to European?
    TD International Index fund is part Europe, so you are getting many stocks twice with this portfolio allocation.

    Personally, I did not pick Canadian stocks for the last 2-3 years because I was sure they would drop someday (they were always rising!!!) but they did not really drop. Sometimes, “personal feelings” do not work out.

  • Canadian Capitalist May 1, 2008, 12:32 pm

    Thanks for the link FT. Sounds like a good plan and I’m sure it will perform well.

    Money Musing: Cash Instinct is right. The International already has a big portion in European equities, so you are highly overweighted in European. Avoiding US equities now after eights years or so of stinking returns is simply performance chasing, IMO.

  • Chuck May 1, 2008, 12:50 pm

    If you’re planning on having a second child. You may also want to consider setting your plan up as a family plan.

    Its gives you a little more flexability at withdrawl time where the funds do not necessarily have to be split 50-50 for each kid. You can still invest in eFunds.

    • FrugalTrader May 1, 2008, 2:28 pm

      If using a family plan under 1 account, how does the CESG work? Do you more CESG / account with every child?

  • abcstocks May 1, 2008, 2:57 pm

    FT,

    Thank you for responding quickly on my request, very nicely summarized with useful information as usual.

    ABC

  • Traciatim May 1, 2008, 3:31 pm

    MoneyMusing: I had both the international and European index in mine at the very start until I realized that the EAFE (International) is Europe, Australasia, and Far East . . . so by having both you are leaning heavily toward the European markets. That may be what you wanted to do, but I figured a nice mix of Canada, USA, and EAFE would be fine. I doubt the USA will go down forever, and even if it’s the next 3 years the dollar cost averaging, will pay off in the next years after that anyway.

    FT: I think your plan is fine, My plan I have no bonds up front so the whole mix is Canada, USA, and EAFE, at age 10 I was planning on shifting things at about 10% a year over to bonds instead of the age bands. I figure after good years I’ll take a little bit more off the table to bonds and in bad leave a little more on so it gets tweaked as needed. I also plan on having my kids conditioned from birth to know that they should work for at least two years before post-secondary school and enjoy their youth a bit to figure out where they are going to go to school and pick what they want to do. That way they can save a good portion of their income to go toward school along with my help they should make it if they work all the way through. My contributions will probably not pay a full 4 years by that time.

  • Four Pillars May 1, 2008, 3:32 pm

    FT – the CESG is the same for each child regardless if it’s an individual or family plan. The contributions and grants are tracked separately.

    The only benefit of the family account that I can see is the potential saving of annual fees. You can transfer money from one sibling to another regardless if the siblings are in a family account or an individual account.

    I haven’t decided if we are going to have two individual accounts or one family.

    Mike

  • darren May 1, 2008, 3:34 pm

    FT,

    I’m not an expert, but my understanding is that the CESG amount is the same whether you use a family plan or 2 individual plans (if you were to have 2 kids). So if you put 2500 in each individual account, you’d get 500 of CESG in each. If you put 5000 in a family account, you’d get 1000 of CESG, with half allocated to each child.

    Also, I found this on TD’s website (http://www.tdcanadatrust.com/planning/resp.jsp):

    Family Plans: A family beneficiary plan is similar to an individual beneficiary plan, except that subscribers can name more than one beneficiary to the plan, provided they are all related to the subscriber by blood or adoption. The family plan provides the flexibility of sharing the assets within the RESP among the beneficiaries. For example, if you have four children named as beneficiaries and only two pursue post-secondary education, the RESP funds may be transferred to those two children within the plan without penalty.

    One more thing – the Conservatives brought in some improvements to the RESP in this year’s budget. The new lifetime limit is 50k/child, and there is no annual contribution limit. I thought I remembered something about allowing plans to stay open longer (particularly useful for family plans) but I can’t find anything to confirm that just now.

  • FrugalTrader May 1, 2008, 3:43 pm

    Thanks for the info guys! I believe the TD e-funds account is free anyways? Perhaps it would be just easier to get separate accounts for tracking purposes (if we have more children).

  • darren May 1, 2008, 3:50 pm

    “You can transfer money from one sibling to another regardless if the siblings are in a family account or an individual account.”

    Four Pillars, is this really true?? I thought that sharing the money between children was really the main reason for family plans to exist.

  • Four Pillars May 1, 2008, 4:02 pm

    Darren – I’ve verified this with my resp provider and it’s in the government online documentation so yes, it’s true.

    It might be a bit easier to do it within a family account (which is an advantage) but there are no penalties or anything if you transfer from one ind. account to another.

    I did a post on this a while back comparing the two, and other than the potential annual fees (which TD efunds doesn’t charge), there isn’t really much difference between the two account types. If anyone has other ideas on this then I’d love to hear it.

    FT – (if we have more children)

    Anything you want to tell us?? :)

    Mike

  • darren May 1, 2008, 4:05 pm

    Interesting, thanks for clarifying that.

  • FrugalTrader May 1, 2008, 4:08 pm

    That’s for all the info FP. I don’t know if I have enough energy to have another kid! This one is taking it’s toll already! ;)

  • PC May 2, 2008, 7:07 pm

    FrugalTrader,

    Thanks for the plan. Looks very solid. When you get around implementing this, could you please update us on the specific steps? Links to forms needed to be completed and time it takes to process them would be very useful.

  • FrugalTrader May 2, 2008, 7:34 pm

    PC, I will see what I can do when i get around to opening the account. Stay tuned!

  • Cash Instinct May 2, 2008, 11:55 pm

    It will be interesting to read about FT’s experience with opening an account. It might differ from Canadian Capitalist’s experience.

    As pointed out by FT, Canadian Capitalist wrote a lot of things regarding RESPs with TD efund. I remember that Canadian Capitalist described his experience with opening an account:
    http://www.canadiancapitalist.com/2007/11/05/investing-in-td-e-series-funds-for-your-resp

    Note that comments from that blog spot talk about some downsides with TD efunds for people who are allowed additional CESG (people with family income under 76K).

  • Jordan Clark May 3, 2008, 8:27 am

    WWABCCCFTD?

    “What would ABC, Canadian Capitalist or FrutalTrader Do?”

    I’ve got 2 young ones 3 and 1. The kids were given $10k each from their grandparents, with no strings attached. What would you do with the cash? Dump it all into a RESP of TD e-Series indexes or go straight to ETFs at Questrade?

    $20k invested over 18 years at 8% would give each kid about $25k for school (assuming 2.5% inflation), is this too much? Should some be kept out of the RESP?

  • Cash Instinct May 3, 2008, 10:01 am

    Assuming I can be named ABC:

    $25k for school depends of where you live.

    If there are 10 colleges and 5 universities within 2km of your house (Exaggeration), your kids will probably stay at home during school. If you live in the country and your kids will need to move, $25k is definitely not too much if you want to pay some of the fees associated with moving out. You will also have to consider the province you live in (school fees depend of the province).

    Questrade offers RESP accounts for Free http://questrade.com/pricing/admin_fees.aspx (but I could not tell you if they are worth it or not).

    However, by putitng the whole $10k in one year, you lose some of the free money from the governement. If I were you, I would open 1 account “family plan” and put 15k (5k per kid) this year and 15k in 2009 to get the full free money to get a guaranteed 20% return. By having a family plan, it will be 1 simple account to manage and if only 2 kids out of 3 (Example) are eligible, you still keep the free money (verification needed, no guarantee).

    Whether you want Questrade or TD depends if you want to dollar-cost average or not (and how much it’s worth to you) Vs how much you are ready to pay in MER fees.

  • Four Pillars May 3, 2008, 10:58 am

    Hi Jordan, I know you didn’t ask but this is what I would do.

    Regarding the decision between TD or Questrade – if you are not planning to make any more regular (ie monthly) contributions then go with Questrade. If you are thinking of doing regular future contributions at some point then TD is probably a better bet.

    Another thing to consider is that to maximize the grant you should contribute $5,000 this year and $5,000 next year for the older child. For the younger child (who I’m assuming was born in 2007) you can put in $5,000 this year and then $2500 in 2009 and then $2500 in 2010. Or if that is too much trouble then just put $5,000 for this year and next year for both of them.

    Mike

  • Jordan Clark May 3, 2008, 11:05 am

    Hey sorry Mike, I respect your opinion too and I’d be thrilled if anyone else can offer suggestions.

    Are the $5,000 chunks for dollar cost averaging, or what’s the reason for this over just lumping the whole $20k at once? How much are you guys planning to contribute to your RESPs?

    • FrugalTrader May 3, 2008, 1:24 pm

      Jordan, as others have mentioned, I would contribute just enough to get the maximum CESG from the govt. Perhaps place the rest in a savings account until its time to contribute again.

  • Cash Instinct May 3, 2008, 1:11 pm

    Sorry FT that my post appeared twice before you removed one of the two, I do not know exactly why it happened.

    For my reply that is above Mike’s reply (23), I implied that you have 3 kids, but you have 2 (I misread)… Mike’s answer is more comprehensive on the issue

    The $5,000 chunks proposed by Mike are because of GESG
    (http://www.hrsdc.gc.ca/en/learning/education_savings/public/cesg.shtml) that pay 20% return (or more depending of your family income) on the first $2,500 per kid that you invest any year in a RESP.

  • abcstocks May 3, 2008, 4:18 pm

    Hi Jordan,

    I would only invest amount in RESP from where I can get maximum CESG benifit. Since, I do day trading and swing trading, I would open acount with brokerage (Questrade mostly) with rest of the moeny.

  • Jordan Clark May 3, 2008, 8:44 pm

    Thanks for the suggestions it should help a lot. I sort of assumed that with the new 2007 rules allowing you to make lump sum contributions that you would simply be automatically eligible for the CESG the following year if over contributed. Are you sure this doesn’t carry forward?

    I agree with Cash Instinct that a single Family plan would be best for simplicity’s sake.

    FrugalTrader: By putting the kid’s money into an investment or high interest savings account outside of the RESP am I exposing their grandparents to the CRA’s attribution rule where they’d have to then claim the kid’s income and pay taxes on it? Or is this unlikely to be a problem?

    Thanks

  • FrugalTrader May 3, 2008, 9:48 pm

    Jordan, AFAIK, if the money is “gifted” to you first, then there wouldn’t be any attribution rules. In saying that, it’s probably best that the grand parents “gift” the money to you, then you make the contributions to the RESP accounts on an annual basis.

    I’m not sure about the carry forward, but I doubt that you can.

  • Four Pillars May 3, 2008, 9:53 pm

    Jordan – resp contributions are not like rrsp contributions where you can contribute a bunch now and then claim some or all of them later.

    You get $2500 of “grant-eligible” contribution room per year and you can use two years worth at a time. So for the 1 year old you can contribute the $2500 from 2007 and $2500 from 2008 which gives you $5,000 for this year. Once you’ve used up any unused years then you only have $2500 per year to use. Any contribution above the “grant-eligible’ limit doesn’t get a grant ever.

    I’m not sure about the attribution issue – seems to me the money would be in your name so you would pay the tax on any interest or dividends – but I’m not too sure about those rules.

    Mike

  • FrugalTrader May 3, 2008, 10:13 pm

    To further the discussion, of course, any interest that you earn on the gifted money will taxed in your hands.

  • Jordan Clark May 5, 2008, 5:20 pm

    Has anyone done a review of the TD Waterhouse RESP account? I’m not sure if it has the same limitations on additional CESG grants or CLBs that the TD mutual fund accounts have? The other thing is it has a $50/year fee unlike a Questrade account. Are there any other differences or benefits?

  • Jan May 7, 2008, 3:31 am

    Hi,

    We used RESP’s when the kids were younger. They are going to Uni now so we are looking at these things from the other end. I am not sure I like them very much.
    They are a pain to get money out of, takes time and lots of paperwork. The thing I don’t like is that the interest is taxed in the kids hands when withdrawn, which may end up causing them to pay tax if they have another job, and also may affect how much tuition deduction may be transferred to you.

    Every parent should put away any Child Tax benefits and especially the day care subsidy (Harper’s Hundred) into a child’s bank account (or informal trust) because the interest from that money is taxed in the kids hands every year. The daycare money comes to $7200. after 6 years and will grow tax free basically, unless your toddler has lots of income. It should pay for first year anyways.

  • Jordan Clark May 7, 2008, 4:24 am

    Jan:

    I think that’s a great idea, I wanted to do the same thing. But I have read mixed opinions online that the Universal Child Care Benefit may or may not be invested in a child’s name without attribution back to the parent.

    Are there any tax people who know for certain if both benefits can be invested in the child’s name so the gains would be essentially tax free?

  • FrugalTrader May 7, 2008, 7:57 am

    Jordan/Jan, the alternative to an RESP account that provides more flexibility when the child becomes 18+ is an informal trust account. With this account, capital gains while the child is younger is taxed in the hands of the child, but dividends/interest are taxed in the hands of the parents.

    The biggest downside is that when the child turns 18, the money automatically becomes theirs regardless of if you think they are ready for it.

  • Jordan Clark May 7, 2008, 8:05 am

    Frugal so are you saying Jan’s suggestion of investing the CTTB/UCCB would still result in dividends / interest being taxed in the parent’s hands?

    For the informal trust you could just never tell your kid they have the account, if they’re crazy at 18, don’t tell them until they’re ready. Just let them try and find it if it comes to that.

  • FrugalTrader May 7, 2008, 9:20 am

    Jordan, if Jan decides to open an informal trust account, then yes, all first generation dividends/interest would be taxed in the parents name. The key to these accounts is to invest for capital gains.

    I’m not sure if hiding the account is the best option, when they find out when they get older, don’t you think that they would be resentful for not telling them earlier?

  • Jordan Clark May 7, 2008, 9:41 am

    Frugal, check out this quote I found regarding CCTB/UCCB on the CRA website:

    “Generally, when you invest your money in your child’s name, you have to report the income from those investments. However, if you deposited Canada Child Tax Benefit or Universal Child Care Benefit payments into a bank account or trust in your child’s name, the interest earned on those payments is your child’s income.”

    http://www.cra-arc.gc.ca/E/pub/tg/5000-g/5000-g-02-07e.html
    (under Line 121)

    So now I wonder is an “informal trust” account different from a “trust”?

  • Spudman May 7, 2008, 1:59 pm

    I am doing the TD efunds RESP as well, but chose an individual plan for our daughter, but plan on having more kids, but since there will be an age gap, I wanted the flexibility to change each plans investments separately. Probably won’t, but maybe as my kids get older and learn investing I could give them some minimal control of “our” money.

    My two cents, Spudman

  • Four Pillars May 7, 2008, 11:39 pm

    Jan & Jordan, thanks for the info regarding the CCTB payments and interest being taxable in the child’s hands. I didn’t know that.

    That’s quite useful if you don’t want to use the RESP – or have more money outside of it.

    Mike

  • KidRaiser August 10, 2008, 7:07 pm

    Just stumbled over this site. Very informative/interesting.

    I have an RESP set up with TD, and am using e-funds in an agressive couch potato manner. (Agressive couch potato sounds like quite the oxymoron.)

    Anyway, I have money deposited in three funds – Canadian Equity, U.S. Equity and International Equity – each month.

    I have a question regarding the government cash that comes in as a result.

    I tried to get it split three ways, so equal amounts get put into each fund. After initially being told this was no problem, I discovered a money-market fund in my account, and found the grants were being placed into it.

    Asked TD again, and was told that the government funds CAN’T be put into e-funds, despite what I was told initially.

    Anybody else have this problem? Is it correctable? Any info would be very appreciated.

    Thnx

  • FT FrugalTrader August 10, 2008, 9:16 pm

    KidRaiser, I have my government money put into a money market fund also. From there, I manually redistribute into the e-fund allocation that I desire.

  • JP August 15, 2008, 6:34 am

    This is an excellent post/website. I am quite glad to have found it.

    Please help me to make a RESP investment decision. I have a 3.5 years old son and a 1 month daughter.

    Current RESP Plan for my son: Global Education Trust Plan
    Invested till date: $6800 (since 2005)
    Enrollment Fees: $4294, Principal:$1450 CESG/Growth:$1050
    Rate or return: 5.5%, 5.5% and 4.7%.

    I am thinking of moving from Global Pooled RESP to TD Efunds/Questtrade Family Plan for the following reasons:
    1. Flexibility to select investment – It is all Bond investment; so low growth and risky during inflationary period (I guess bond prices would come down during inflationary period)
    2. Better growth return
    3. Will not loose income in case I move out of Canada (remote possibility)

    If I move out of Global Pooled RESP, I will loose enrollment fees of $4294.

    Hypothetical RESP compounded growth projections (assuming $2000 annual investment for next 15 years):
    Global Pooled RESP @ 5% growth: 68,545.88
    Global Pooled RESP @ 3% growth: 56,594.06

    Self-directed RESP in TD e-funds/Questtrade (assume enrollment fees is deducted)
    Self-directed RESP @ 7% growth: 71,746.20
    Self-directed RESP @ 5% growth: 59,814.38

    1. Please comment whether moving out of Pooled RESP now, loosing $4294, is a bad idea.
    2. Which one is better? Monthly TD Efunds contribution for dollar cost averaging or Yearly (January) one time contribution in ETFs for higher compound growth rate (As money stays for one year longer)?

    Thanks in advance,
    JP

  • Four Pillars August 15, 2008, 10:41 am

    JP – that’s a tough situation to analyze.

    As far as the enrollment fee goes – you’ve already lost that amount regardless of what you do, so that shouldn’t factor in the decision to move or not.

  • JP August 15, 2008, 11:32 am

    Sorry I forgot to mention. If I dont withdraw, my enrolment fees will be returned back when the payment starts. I have included them as part of payment in my Hypothetical calculations.

  • Me Contra September 19, 2008, 6:54 pm

    hey JP, if it helps with the decision, read about what i did in my blog
    http://mecontra.blogspot.com/2008/09/resp-issues-with-usc-resp-heritage-resp.html

    yes, I moved from pooled plans and lost 6K in the process…

    about the actual numbers, i also have a table i made up for the same purpose – fill in your numbers.

  • elman December 18, 2008, 5:58 pm

    question 1:
    It says on the CESG site that
    On the first $500 you save in your child’s RESP, the Canada Education Savings Grant will give you: up to $150, if your net family income is between $37,885 and $75,769,
    When you save more than $500 annually, the Canada Education Savings Grant could add up to $400 on the next $2,000.

    would that mean that I could get 550/ year grant money if I put $2500 ? or is there a cap of $500 grant money

    question2:
    unused CESG can be carried forward. so if our net family income is between $37,885 and $75,769 and we only put $500 into RESP to get the $150 grant. what is the amount of CESG that can be carried forward ? $400 or $350.

    I am curious to know because we are planning to only put $500 on RESP to get the additional CESG for now and put the rest into our mortgage. then when we are done with the mortgage we can catch up with the RESP without losing out on the additional CESG bonus. Does that sound correct ?

  • georumble.com December 19, 2008, 4:47 am

    Is anyone using BMO Mutualfunds and do they have something similar to TD e-funds?

    I just opened individual RESP’s for my 6 and 2-week old sons at BMO Mutualfunds, the money is invested into their Intuition RESP Savings Portfolio with following distributions(i think):

    50% GICs
    38% BOND Fund
    12% DIVIDEND Fund

    and they say the overall MER of the portfolio is about 0.8%

    Comments?

    Thank you,

    G.

  • Jordan December 19, 2008, 11:39 am

    @ jp

    Wow that enrollment fee is outragous, you should report them to an investigative news service like Olsen on your Side to slam them with bad press.

    If the pooled plan is strictly bonds, then maybe you could stay invested in it, but don’t contribute anything more. Start a second separate RESP account with TD e-Series and do your monthly dollar cost averaging contributions but don’t invest anything into the TD Bond index.

    @ georumble.com

    Their fund sound too conservative, you’ve got over a decade to invest and are very fortunate to be starting at a market low, you could take advantage of that by having more market exposure. Plus the MER is twice what you’d pay with TD e-Series funds.

  • newbie January 15, 2009, 5:49 pm

    Is TD the only bank that offers e-funds?

    • FT FrugalTrader January 15, 2009, 10:24 pm

      newbie, as far as I know, you can only get the td e-funds via TD.

  • J. March 24, 2009, 7:31 pm

    I know this is a bit off topic, but can you do some comparisons on fund companies in Canada? In the U.S., Vanguard specializes in low cost index funds; Fidelity usually has the best research tools; T. Rowe Price has a lot of analysts; Janus focuses on high-risk/high-return funds, etc. I wonder what the Canadian equivalents are like. In particular I want to know what the closest thing to Vanguard we have in Canada. Is TD the best for low cost mutual fund as FT suggests in this post? I’d appreciate the info.

    Thanking in advance.

  • Michael April 1, 2009, 4:11 pm

    Albertans need to ensure that their RESP provider is able to get them the Centennial Savings grant of $500/child. In this regard, avoid Scotia iTrade (formerly eTrade) as it has made it clear to me that I’m out of luck with the RESP I have with it.

  • Jordan April 22, 2009, 2:56 am

    I just noticed my link to the CRA website is now broken. Unfortunately the government makes no effort to create permalinks or redirect previous pages.

    Just to save someone else the hassle, the new “2008” version of the page which includes the clause of interest attribution for the CCTB/UCCB payments to minors, it is now at:

    http://www.cra-arc.gc.ca/E/pub/tg/5000-g/5000-g-02-08e.html#P532_55436

  • laydeejai November 7, 2010, 12:21 pm

    My Question is this …..

    With so much invested into Equity up untill age 14 …. how do you recoup losses if the market crashes, or is effected by any situation in the world? EG: Haitti – Hurricaine. When the market goes down, so does my fund, if my fund is effected by the stock market it effect my CESG … I was told if I lose the CESG in the Market and my child doesnt go to school, I now have to pay that Grant back to government….

    Also the MER fees… how come nobody mentions this? ON AVERAGE we Canadians are paying a minimum of 2.49% in fees that are compounding on our total investments … so at the end … thats upwards to like $16,000+ that I will NEVER SEE AGAIN!!! Not to mention if the market crashes here and there during the first 14yrs … and we all know historically it happens on averege every 7yrs..

    So, I have a newborn … I want to invest $2500, its 2010 the market crashed both in 2008 and 2009 so when my son is aproximately 5yrs old the market should crash … then again at 12yrs … so how will I recoup those losses with only 5-6yrs left before he will need the money?

    I was looking into a group plan… Heritage Education and they have a fee like all group companies, however I get that back when my son goes to school and its a FRACTION of what I would be paying with a bank/trust comp with the MERs

    Can you offer advise?

    • FT FrugalTrader November 7, 2010, 1:57 pm

      laydeejai, you really can’t control what happens to the markets, which is the reason why the portfolio shifts from equities to fixed income nearing the withdrawal date. With regards to MERs, the TD e-series that is mentioned has the lowest mers around for index mutual funds. On the range of 0.50%.

  • Peter November 27, 2010, 5:10 pm

    What are the names of the funds that you have the above strategy invested in? For example, under global equity, I see that there are a couple of e-series funds available, how do I know which to choose to follow the couch potato approach?

  • FT FrugalTrader November 27, 2010, 10:24 pm

    Peter, can you list the exact names you see under the e-series?

  • Peter November 29, 2010, 12:10 pm

    These are the line items I see under each category. There seems to be so many I’m not sure which to purchase to follow the couch potato. Thanks for the help!

    Fixed Income:
    TD CDN Bond Index

    Canadian Equity:
    TD CDN Index

    US Equity:
    TD DJIA Index
    TD Nasdaq Index
    TD US Index
    TD US Index Currency Neutral

    Global Equity:
    TD European Index
    TD Int’l Index
    TD Int’l Index Currency Neutral
    TD Japanese Index

    TD Mgd Idx Portfolios:
    TD MGD IDX AGG GR
    TD MGD IDX BAL GR
    TD MGD IDX INC
    TD MGD IDX I&M GR
    TD MGD IDX MAX GR

  • FT FrugalTrader November 29, 2010, 12:15 pm

    @Peter, e-series funds have an “e” after the fund name, such as:

    TD CDN Index-e**
    TD US Index-e**
    TD CDN Bond Index-e**
    TD Int’l Index-e**

    That’s what I use for my “couch potato” like portfolio.

  • Peter November 29, 2010, 12:27 pm

    These below all had the “-e” after the name…I just didn’t know what to choose to follow the couch potato

    Fixed Income:
    TD CDN Bond Index

    Canadian Equity:
    TD CDN Index

    US Equity:
    TD DJIA Index
    TD Nasdaq Index
    TD US Index
    TD US Index Currency Neutral

    Global Equity:
    TD European Index
    TD Int’l Index
    TD Int’l Index Currency Neutral
    TD Japanese Index

    TD Mgd Idx Portfolios:
    TD MGD IDX AGG GR
    TD MGD IDX BAL GR
    TD MGD IDX INC
    TD MGD IDX I&M GR
    TD MGD IDX MAX GR

  • Peter January 6, 2011, 1:12 pm

    Hi All,
    Can anyone offer advice on the easiest way to rebalance the portfolio when the fund values change and skew your percentage distribution between funds? I was thinking of doing an auto purchase every month to get a 40/20/20/20 split between the funds but what’s the best way to rebalance also factoring in the extra cash from the grant? Do you rebalance yearly and buy just to top up or do you transfer from one over valued fund to a lower valued one? Any tips on how to make this as painless and automatic as possible using easyweb would be appreciated. Thanks!

  • FT FrugalTrader January 6, 2011, 1:25 pm

    @Peter, CanadianCapitalist created a spreadsheet to help with the rebalancing. I also only rebalance with new funds.

    http://www.canadiancapitalist.com/sleepy-portfolio-rebalancing-spreadsheet/

  • Peter January 7, 2011, 4:08 pm

    @FrugalTrader: thanks for the info. Once the funds are in the “TD CDN Money Mkt” would you do a ‘switch’ to the TD e-series funds when you rebalance? Does it make sense to rebalance more than once a year?

  • jodi January 10, 2011, 1:28 pm

    I’ve recently been contacted by Heritage Education Funds about opening an account with them. To start off I should let you all know that we are a low income family with only one parent working, we have 2 children ages 6 born 2004 and our daughter born 2009. I would like to take advantage of the CLB and basically anything else the government is going to contribute, but at this time we don’t have the finances to contribute.
    what would you suggest for us to do?

  • Baalat January 16, 2011, 12:48 pm

    @Peter @FrugalTrader: I have the same question. According to TD e-series rules the minimum ammount to buy each time is $100. So if you contribute $2500 per year (to maximize grants) and have 4 e-funds to distribute it would be $625 per fund, or a maximum of 6 transactions per fund ($104.17 each) per year. What I have not found is a way to make it automatically with e-funds (will we have to do it manually, each 2 months?)

  • FT FrugalTrader January 16, 2011, 12:53 pm

    @jodi, once you open an account with one of those RESP scholarship companies, you are obligated to make the payments. Personally, if you don’t have the cash to contribute, then don’t. Perhaps you can take cash gifts etc to put towards their education.

    @Balaat, I do everything manually as well. All cash goes directly into a money market fund initially, then I rebalance as I see fit with the new cash.

  • Steph March 2, 2011, 6:09 pm

    @Baalat, the minimum is only $25 per transaction if you set up a pre-authorized purchase plan (PPP). I set up a monthly PPP based on my desired allocation and then plan to use birthday (July) and Christmas money to rebalance (manually).

  • Will April 11, 2011, 2:06 pm

    @Steph how can one contribute only $25 when each fund costs roughly $10 and the couch potato method uses 4 funds? 25 divided by 4 would not allow for the purchase of a single share of any e-series fund…

  • Del Anderson January 29, 2013, 11:19 pm

    I have been a TD/Canada Trust customer since the early 1980’s, both personal and business. I recently opened a RESP for my Grandson and was blindsided when I was told that I needed TWO RESP accounts – one for the self-administered individual mutual fund and one for a term GIC. The policy is that all grants other than the CESG must go into the Term GIC account and remain in that account until he withdraws the funds or the account is collapsed!
    In this case, the GIC account would start with $1,100.00, gain $100 per year (CLB) and another $300 (A-CESG) over the next 14 years – not insignificant to me.

    Unless you want your RESP, and Government Grants to be invested in a Term GIC, beware of TD Canada Trust’s RESP !

    If you want your RESP invested in mutual funds, if you want to receive Government Grants that are available (beyond the CESG), and, do not want a RESP account plus a Term GIC account (yes, two accounts!), look at either Royal Bank of Canada, Scotia Bank, CIBC or Bank of Montreal and not TD Canada Trust!

    TD Canada Trust’s policy dictates that if you wish to receive Government Grants such as the a-CESG, the Canadian Learning Bond, Quebec Education Savings Incentive, or the Alberta Centennial Education Savings Grant, they will only process the applications if the funds from these Grants are placed into a Term GIC. And, these funds cannot ever be rolled into your mutual fund RESP or transferred.

    You have no choice in this !

    With TD Canada Trust, if you wish your TD Canada Trust RESP be invested in Mutual Funds, and, you also wish to receive Government Grants beyond the CESG, you must have two RESP accounts (imagine the headaches for you the subscriber, and also the problems when the beneficiary begins his or her post-secondary education) with this. You have no choice with TD Canada Trust.

    Royal Bank of Canada, Scotia Bank, CIBC or Bank of Montreal do not have such a restrictive policy.

  • David May 1, 2014, 12:43 pm

    After reading many posts surrounding RESP portfolio strategies, I decided to share with you the strategy I build for my 9 month old. Here it is:

    33% CDZ.TO
    18% CEW.TO
    12% VGG.TO
    9% XEF.TO
    8% ZLU.TO
    8% ZSP.TO
    5% XCB.TO
    4% XEC.TO
    3% HFR.TO

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