One of the first things we did after our kids were born was open an RESP account. We set-up a family plan, rather than a single beneficiary plan, and have contributed $200 per month for the past few years.

We just put money into a GIC for the first year.  The account was easy to set up and we were told this account was the easiest way to get at the government grant money, specifically the Alberta Centennial Education Savings (ACES) grant, which contributes $500 when your child is born and then another $100 when your child turns 8, 11, and 14 years old.

When our youngest child was born I stopped contributing to the GIC account and opened up an RESP account with TD Direct Investing (formerly TD Waterhouse). There I started to put money into the popular TD e-series funds.

Investing With TD e-Series Funds

TD e-Series funds are perfect for my RESP because the management expense ratios are super low and I can contribute small amounts every month at no cost.

Each month I contribute $200 into either the Canadian index fund, the US index fund, or the International index fund.  The government kicks in an additional $40 per month (20 percent) with the Canada Education Savings Grant.

Here’s what my RESP portfolio looks like today:

Fund Market value % of account
TD Canadian Index (TDB900) $1,334.67 30.48%
TD US Index (TDB902) $1,560.19 35.63%
TD International Index (TDB11) $1,484.29 33.89%
Total $4,379.15 100%

The TD e-Series portfolio is all in equities today for two reasons.  My kids are both under five and so they have 14 years or more before they’ll need to access these funds.  That’s a reasonably long time frame to take some risk and hopefully maximize the returns.

The other reason is because, even though I stopped contributing to the GIC account, I can’t collapse the account or I’ll lose the ACES grant.

Related: Can You Succeed With An All GIC Portfolio?

So I get a different asset mix when I add the amount held in the GIC account to the total RESP portfolio.

Fund Market value % of account
TD Term Deposit/GIC $2,631.99 37.54%
TD Canadian Index (TDB900) $1,334.67 19.04%
TD US Index (TDB902) $1,560.19 22.25%
TD International Index (TDB11) $1,484.29 21.17%
Total $7,011.14 100%

The total portfolio is actually quite conservative, with over one third invested in fixed income and less than two thirds invested in equities.

I’m treating the GIC account as the fixed income portion of the portfolio, meaning I won’t be adding a bond fund anytime soon.

I hope the portfolio will look like this in six years, by the time my oldest child turns 10:

Fund Market value % of account
TD Term Deposit/GIC $3,000 9.52%
TD Canadian Index (TDB900) $9,500 30.16%
TD US Index (TDB902) $9,500 30.16%
TD International Index (TDB11) $9,500 30.16%
Total $31,500 100%

From there I’ll start adding more money to the fixed income portion of the RESP.  The goal is to dial down the risk as my kids approach University age.

Final Thoughts on RESPs

We plan to save about $100,000 for our children’s post-secondary education.  That sounds like a ton of money for two kids, but tuition in Canada costs at least $5,000 per year (today) and when you factor in books and housing expenses it might not be enough to cover the full cost of education.  I’m confident in our plan and that we can get their using TD e-Series funds.

I’m not maxing out my RESP contributions today because we have other financial priorities to look after.  However, there’s still time to get all the government grants (CESG) even after our kids turn 10.  That’s because you can still catch up one year of contributions each year, meaning you can contribute $5,000 in a year and get $1,000 worth of grants to use up some of your unused contribution room.

Have you considered TD e-Series funds for your RESP portfolio?

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