If you’ve opened a registered education savings plan (RESP) for your child or grandchild, well done—you’ve started preparing for their post-secondary future. With an RESP, your family can access valuable government grants worth thousands of dollars. The next step is choosing what to hold inside the RESP and how to adjust that mix as your child grows.
Saving for post-secondary education can resemble saving for retirement
Many of the same principles that guide retirement saving also apply to RESP investing. When building an RESP portfolio, consider these core factors:
- Time horizon: How many years remain before you’ll need to make the first withdrawals
- Risk tolerance: How comfortable you are with market volatility and short-term losses
- Budget and contributions: How much you can regularly contribute toward education savings
- Knowledge and confidence: Whether you plan to manage the investments yourself or prefer professional help
- Return objective: The investment returns you need to reach your education funding goal, including protecting purchasing power against inflation
- Tax planning: Timing and structuring withdrawals to be tax-efficient for the beneficiary
Below is a practical look at each factor and which types of investments typically suit different stages of an RESP.
Time horizon—how long you can contribute to an RESP
Your investment choices should reflect how long the money can stay invested. With a longer horizon, you can usually tolerate greater short-term volatility in exchange for higher long-term growth potential. That is why equity-focused options—individual stocks, equity mutual funds or equity exchange-traded funds (ETFs)—often make sense when the beneficiary is very young. As the date for withdrawals approaches, it’s common to shift toward lower-risk assets such as bonds and guaranteed investment certificates (GICs) to preserve capital and reduce volatility.
Tools
MoneySense’s ETF Screener Tool
RESP risk level and tolerance
Every investment carries some level of risk. If you prefer capital stability, you can choose conservative holdings such as high-interest savings accounts, bonds and GICs. If you aim for higher growth, equities and equity-based funds will expose you to market swings but offer the potential for stronger long-term returns. Keep your personal comfort with market fluctuations in mind—your portfolio should match a level of risk that you can live with without making emotionally driven decisions during downturns.
What’s your budget for school?
Rising living costs make it harder for many families to save, but you don’t need a large amount to get started. Small, regular contributions—$50, $100 or more each month—compound over time, especially when a plan is opened while the child is still very young. Starting early also maximizes the benefit of government grants available through RESPs. If cash flow is tight, focus on a consistent contribution schedule and claim available grants as funds are deposited.
How to manage the money in an RESP
Decide whether you want to actively manage the RESP investments or rely on professional management. If you lack time or investment experience, consider a managed solution or a plan with an automatic “glidepath” that reduces portfolio risk as the beneficiary approaches post-secondary studies. Financial professionals and dedicated RESP providers can help design and maintain a portfolio that aligns with your goals and timeline.
Investing goals for an RESP
Estimate how much you’ll need for your child’s education and build a plan around that target. For context, one useful figure to keep in mind is the average cost of undergraduate study: $7,360 was the average cost for one year of full-time undergraduate studies in the 2024–2025 school year, excluding accommodation, books and other living expenses. Professional programs such as medicine, dentistry and law typically carry much higher fees, and students also face additional costs for housing, food, transportation and technology. Your RESP strategy should aim to cover tuition and some portion of these living expenses or be combined with other savings sources.
Is an RESP taxable?
RESP withdrawals are taxable on the investment income portion, but this income is typically taxed in the hands of the beneficiary—often resulting in lower tax rates than would apply to the subscriber. Contributions are not taxed when withdrawn because they were made with after-tax dollars. Proper planning helps ensure withdrawals are timed and structured to minimize tax for both subscriber and beneficiary.
Risk and RESPs
Choosing the right mix of investments for an RESP depends heavily on the child’s age, the remaining time before post-secondary education, your contribution capacity and your comfort with market risk. Strategies that work for a preteen will differ from those suitable for a child in daycare. If you’re unsure about asset allocation or contribution pacing, consult a financial planner to create a clear savings roadmap and to take full advantage of RESP grants and tax benefits.
More about RESPs:
- What can an RESP be used for?
- RESP vs RRSP and TFSA: What’s the best option for education savings?
- The top 5 questions about RESPs
- Is an RESP worth it? Yes, even if only for the government grants
This article is sponsored.
This is a paid post that provides information and may highlight a client’s product or service. The article was produced by MoneySense with contributions from freelancers and reviewed by the client.
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