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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31 Comments

  1. Russ Abbott on August 5, 2013 at 5:21 am

    Can you explain how you will get your portfolio from $7,011.14 to $30,000 in six years?
    Is this based on the historical returns from the TD E-Funds?

    Thanks

    • Echo on August 5, 2013 at 7:23 am

      @Russ – I contribute $200 per month, or $2,400 annually. Plus I get $480 per year in CESG money.

      $2,880 x 6 years is $17,280.

      I’m assuming 5% annual growth for the e-Series portion, and 2% annual growth for the GIC portion. That takes the total value up to $31,500 (roughly).

  2. Brian Lorch on August 5, 2013 at 8:18 am

    I’ve started a similar portfolio for my grandsons. For international, I used TDB905 – International Equity Currency Neutral.

    I tried searching for TDB11 – the international fund you are using – on the TD Waterhouse but could not find it.

    How does TDB11 differ from TDB905?

    Thanks

    • Echo on August 5, 2013 at 8:39 am

      @Brian – I use the TD International Index (TDB911) – http://screencast.com/t/GqUHQVl1

      The only difference is that your international fund is currency neutral while mine is not.

      I chose the non-hedged version because the MER is lower and the tracking error is poor on the hedged version.

  3. Brian Lorch on August 5, 2013 at 8:20 am

    Hi Again

    Just curious. Are you paying an annual admin fee for your RESP account. At TD Waterhouse, I’m paying $50 per year.

    • Echo on August 5, 2013 at 8:41 am

      @Brian – there is a $50 annual admin fee on the RESP account with TD Direct. I called and got it waived this year, but they said I’d be charged each year going forward.

  4. KrissyFair on August 6, 2013 at 1:19 pm

    Shame you’re stuck with that GIC right now!

    We started an RESP pronto too. Right now it’s our top savings priority – I love free money from the government – so we’ve maxed it to date for both kids. The plan is to keep maxing it for a few years (until oldest is 7 or 8) and then stop contributing and let it grow. Whatever they end up with, they end up with.

    Since I know we won’t be touching the funds for another 12 years I’m holding individual positions rather than ETFs or funds. And it’s 100% equity right now with the plan to ultimately fund the fixed income portion from the yield on the equities.

    • Echo on August 7, 2013 at 10:52 pm

      @KrissyFair – The nice thing about RESPs is that even if you just got the grant money you’d still beat the pants off of most other investment returns.

      A 20% guaranteed return is unreal, and then add the ACES grant money on top of that!

      I guess what I’m saying is I’m less concerned with the lower returns from the GIC portion because the grant money is the icing on the cake.

      • KrissyFair on August 8, 2013 at 9:21 am

        Oh I know the match is awesome and totally outstrips any gains you’ll get after. I’m just a bit of a… shall I say, control freak? So not being able to move something would bug me 🙂

        • Echo on August 8, 2013 at 9:28 am

          I fought with TD for a while on this but I guess their brokerage doesn’t offer the ACES grant and so if I transferred the GIC to my brokerage account then the grant would be clawed back.

          The government website confirms this:

          “If you are transferring to an RESP provider that does not currently offer the ACES Plan, your grant money will be returned to the government. You have the option to reapply for the ACES Plan grant if your provider begins offering the grant or you switch to an RESP provider who offers the ACES Plan grant within 6 years of the eligible age.”

  5. LoonieLover on August 6, 2013 at 5:16 pm

    Hi Robb,

    Have you considered the BMO Corporate Bond Target Maturity ETF? The name pretty-much says it all. The ETF invests in corporate bonds that mature during a particular year. As your kids get closer to university age, you’ll want to move their money into more predictable vehicles, and this provides one way to do that.

    We’re 100% in equities at this time, as our oldest is 11 years away from post secondary. This is an option I’ve considered for increased safety, but I haven’t yet made a decision on it. Thoughts?

    http://www.etfs.bmo.com/bmo-etfs/glance?fundId=83030

    Jeff

    • Echo on August 7, 2013 at 10:56 pm

      @Jeff – That fund looks pretty good, something to consider when I’m looking for more fixed income options.

  6. AdinaJ on August 7, 2013 at 8:22 pm

    This reminds me … I need to review our son’s RESP. It’s pretty bad – I can’t even remember whether it’s currently in mutual funds or index funds. I know, I know … His is currently sitting at around $6K, not bad for a 2 year old. I don’t see it getting to $100K by the time he’s 18, though, so here’s hoping he’s smart enough to qualify for some scholarships 😉

    Do you have any idea whether it’s possible to switch RESPs from one financial institution to another, like RRSPs?

    • Echo on August 7, 2013 at 10:45 pm

      @AdinaJ – I should clarify the $100k is in a family RESP plan and is for both our kids.

      $6k in two years is great!

      Yes, you can definitely transfer RESPs from one FI to another.

  7. Clive on October 7, 2013 at 7:15 pm

    This may be a dumb question but are the dividend-paying international and us index funds in your current resp portfolio subject to non-resident withholding taxes?

  8. Mag on March 18, 2015 at 11:30 am

    I opened a RESP family account (td e series) for my two kids and the accounts were just converted. I see two separate account numbers but each account says “family”
    Is this how it’s supposed to be set up? Do I have to build two separate portfolios one for each child? Or was this account not opened properly.

    • Echo on March 18, 2015 at 11:47 am

      Hi Mag, it’s hard to say without seeing exactly what you’re referring to. I have a family account set-up for my two kids as well. It’s just one portfolio, but the bank has to track contributions and grants for each child individually.

      For example, here it shows that I’ve made a $300 contribution and then, rather than showing a $60 CESG contribution (20%), it shows two separate $30 CESG contributions, indicating that the contributions have been equally split for my two kids.

      http://screencast.com/t/8EKhz0rBbyv

  9. Mag on March 18, 2015 at 11:58 am

    Hi thanks for responding!
    I just opened this e series account. I have a transfer of funds coming in from another institution so right now there’s $0 in these accounts.
    When I set up this account I was not asked if I want to split the grant $ evenly when I make purchases.

    When I log into EasyWeb I see

    Investments
    TD MUTUAL FUNDS RESP FAMILY PLAN – 2378xx…..
    TD MUTUAL FUNDS RESP FAMILY PLAN – 2378xx….

    And I can click on each one and looks like I can buy funds from each one. But does that mean I have to have two separate portfolios even though it’s one family plan? Is it set up this way so the gov knows which child is getting grants etc. I just didn’t expect to manage two separate portfolios

    Also another question – does my transfer from the other institution affect my contribution limit for this year?

    Thank you

    • Echo on March 18, 2015 at 12:04 pm

      Hi Mag, I’d contact someone at TD to merge these accounts into one. The only thing I can think of is that it was set up this way in order to receive the transfer in-kind from the other institution – but I’d check with TD to be sure. As I mentioned, the idea of the family account is that you can split up the grants and contributions within just one account, so it’s not necessary to manage two.

      The in-kind transfer from another institution will not affect your contribution limit for this year.

      Edit: Mag, I should clarify that my family plan is held within TD’s discount brokerage arm (TD Direct) and not with TD’s regular mutual funds. There may be a different process to manage. Again, I’d follow up with TD to make sure you have it set up correctly. Ask how the grants and contributions are split to make sure they are doing 50/50 (or whatever you intended for your kids).

  10. Mag on March 18, 2015 at 2:08 pm

    Thanks!
    I called td and a mutual funds rep told me the account has to be set up this way to distribute the grant to each beneficiary but it’s all under one umbrella. To be honest I don’t find the reps overly knowledgeable in the whole e-series process and I never know if I’m getting the right answer. Frustrating. I guess we’ll see what happens after the funds come in and I make my first contribution.

  11. Mag on March 18, 2015 at 3:26 pm

    Just read your edit
    Thank you
    Mine was set up at a branch

  12. Mag on March 19, 2015 at 9:10 am

    So I’m all set ready to buy my eseries and my husband suggested I not buy us index because of our loonie

    I am planning on using a couch potato portfolio
    75/25 at this point

    Any feedback on purchasing us funds when the loonie is so low or articles I can read and have him read?

  13. Mag on March 19, 2015 at 11:31 am

    Stick with the location because otherwise Id basically be trying to “time” and that goes against the couch potato strategy correct?

    Thank you so much for taking the time to respond to me

    • Echo on March 19, 2015 at 11:34 am

      That’s right! My pleasure, Mag. Thanks for reading.

  14. Mag on March 19, 2015 at 11:39 am

    Sorry for the typos
    Thank you again!
    I love you blog

  15. Mag on April 10, 2015 at 9:45 am

    Are there any switch fees / early redemption fees when you switch from td cdn money market to td eseries mutual funds?
    When I see the government grant in the money market fund I can allocate it immediately?

  16. JC on December 3, 2015 at 10:15 pm

    Mag
    Fast forward to today, what did you find with your TD Family Plan? Mine is the same, 2 account numbers, 2 separate buckets of money, but listed as “family plan”. Did you have to change something to get them to combine?

    My TD advisor said the benefit of one common amount with several listed children is that the account can be used by any of them without a limit, i.e.if the first one goes to a lower cost school and the second goes on to grad school they can pull more than the first and even use their siblings grant money..would be good if someone else could confirm this or clarify.

    • Alex on July 5, 2016 at 3:29 pm

      2 JC and Mag,

      I know a lot of time has passed but have you solved your problem? I’ve just opened a Family plan RESP with TD and see two accounts as well.

      So, do you have to build two portfolios?

  17. YC on February 8, 2016 at 7:47 am

    Hi,

    I’m new to TD eSeries and couch potato folio, I was going with the Balanced one ie. 40% TD Bond and 20% for all the others index one Can, US and Int. What I wonder is what is the best asset mix if my daughter is about to turn 10 years old? I know I should start a conservative mix when she gets to her high school years but I wonder if that’s the best mix right now? What are your thoughts?

    • Curt on February 11, 2016 at 11:47 am

      I’ve seen multiple authors state the following equation as a great one in determining the amount of funds in equity vs fixed income:
      [18 – (your child’s age)] X 10.
      (http://canadiancouchpotato.com/2010/11/05/taking-risk-in-an-resp/)

      Since your daughter is 10…
      (18-10) X 10 = 80%
      So 80% of the funds should be put into equities. The older your child gets, the lower the % should be in equity.

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