RESP Guide (Registered Education Savings Plan)

UPDATE: I was recently interviewed about RESPs again for the 2023/2024 year and so I wanted to include that video for you since the RESP training video that I was asked to do for all the Questrade customers (see below) is now a few years old (although it it still highly relevant and applicable since the fundamental rules for it have not changed.). 

To start, here is the interview on ETF Market Insights for the 2023/2024 year:

In addition to the above, I've included a written guide and video presentation below which goes into even more detail on RESPs.

The video below is a very good primer for the RESP, and it's actually a presentation that I was asked to do by Questrade, to educate their users. Whether you are with Questrade or not, the video will be relevant to you as the focus is on RESPs and not Questrade and RESP specifically.

Enjoy the presentation, and remember that you can watch it in full-screen mode which I definitely recommend so you can see all the numbers:

Written Guide Portion on the RESPs:

If you have kids, then definitely read this as it will be highly relevant and is an easy way to get a substantial amount of free money from the government (up to $500 per year per child).

The BIG reason that you want to do the RESP yourself, is that many of the RESP companies that are giving you their sales pitch are known to have very strict rules and restrictions that really limit your options and can significantly negatively impact your gains. 

I'm not going to paint with too broad of brush strokes and say that they are all bad, but I've talked to enough family and friends who either had their returns decimated by them, or were on the path to get their returns decimated if they decided to just let them manage their RESPs for them.

The bottom line, is that in my opinion, if you know how to buy ETFs, you can easily just open an RESP account in Questrade (or another brokerage), and just buy the ETFs you want within your RESP, and get that free $500 per kid, per year (you get the $500 if you contribute $2500 for that kid in the year, and less than that if you contribute less).

Again, you don't have to use Questrade, but I use them for my RESP because they let me buy ETFs for free (i.e. no $5-$10 commissions per trade).

If you want to know the ins and outs of the RESP, the best place is to get it straight from the horse's mouth which is here:

They keep this updated so you are better off reading about it here as the information is more accurate and up-to-date there than on any other site. If however you have any questions, feel free to ask them in the comments and I'll gladly help.

How to open an RESP in Questrade:

1. Login into Questrade, and click the button to open a new account. 

If you haven't signed up to Questrade yet, the process is the same, just click the "OPEN AN ACCOUNT" button on the top of their page here.

2. You will now see a list of different accounts that you can open (like Margin, TFSA, RRSP, etc).

3. You likely won't see RESP in that initial list, so click on "See more account types".

From here, select "Education". Now select "Family Registered Education Savings Plan".

Aside: You'll notice that there is also the option for just a "Registered Education Savings Plan" (as opposed to the Family RESP that I mentioned above). The reason that I recommend the Family one is that it lets you have just one account for all your kids (instead of having to open up another RESP account if you end up having more kids). 

It also gives you some extra flexibility in using that money down the road so this is just a better option (I go into more detail about this in the videos above). You don't get any less money from the government by having a Family RESP instead of an individual RESP.

4. Follow their steps to open this account (it's free), and feel free to reach out to their online live support if you're having some issues with the signup process.

Aside 2: With a Family RESP, when you make contributions, they will be evenly split between your kids. If you don't want the money evenly split, then talk to Questrade's live chat support and tell them. They will then send you a form which you can use to specify what you want the split to be.

Make sure you read the RESP rules at the link I mentioned to actually fully understand this program. But, as far as the mechanics go, investing in the RESP is the same as investing in your TFSA or RRSP. The big difference though, is that once you do it, within a few weeks you'll have extra money show up in your account that you didn't put in there. That is the grant from the government which you can now invest however you'd like. This will now grow and compound like the rest of your investments (remember to actually invest it, as when you receive it, it will just sit there as cash in your RESP account).

While this whole RESP setup thing is a bit of work, it's also free money and totally worth it. For example, I personally do the amount to get the max grant every year. At the time of this writing, that's $2,500 that I put in every year per child, and that gets me a free $500 per child from the government every year. You're eligible for the exact same thing.

$500 is 20% of $2,500 so I view this as a guaranteed initial 20% return that I'm getting on my $2,500 investments. You can't get a guaranteed 20% anywhere, so this is definitely a good deal. Then of course you invest that 20% and that starts to compound along the rest of your money.

What do I invest in within my RESP?

My kids are currently young, so I actually go 100% equities for their RESP. Once it gets close to them going to post-secondary I might at that time add more bond exposure in case there is some major decline in the markets shortly before they need the money for school.

In terms of what ETF(s) I buy for their RESP, I actually just buy one of the asset-allocation ETFs from BMO ETFs. The one I currently buy is ZEQT. This is the all-equity BMO ETF that gives me global diversification. 

If I wanted a bit more bond exposure, I would likely pick one of the other ETFs in that lineup. i.e. Ones that invest in the same way, but have a bit more dedicated to bonds instead of equities (ex. an 80/20 split like ZGRO)

Obviously do your own research on what ETF to buy (as I don't know your personal situation), but here is my thought process on why I chose that one:

As you know, I'm all about buying the individual ETFs due to their lower cost and higher tax efficiency. However, the reason that I decided to use an asset-allocation ETF for the RESP, is that:

1. The amount in the RESP won't be nearly as large as your retirement accounts (RRSP, TFSA, taxable account). So, even though the MER on the asset allocation ETFs is more, it's not a giant amount, and I'm personally willing to pay that small extra MER amount for the automatic rebalancing that the asset allocation ETFs provide.

2. The RESP should be viewed as its own portfolio. Its purpose is education and not retirement. Therefore, if one type of ETF is more tax efficient outside the RESP than in it, that doesn't matter to me as I still want that ETF in there to get exposure to those markets. In other words, since the RESP is its own independent portfolio, I want it to be fully diversified internationally, and that is more important than saving a small amount of money due to tax efficiency (i.e. I don't want to exclude exposure to a certain market in my RESP because that market is more efficiently held outside the RESP).

I hope that helps. If something is unclear, feel free to reply in the comments below and I'll add my answer to this guide for you. 🙂


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