This week I started a Registered Education Savings Plan for my 6 week old son.
For some great information on RESPs, you should visit Canadian Capitalist or Quest for Four Pillars. These two authors provide some of the best, most thorough information on Canadian RESPs available on the Internet today. All the great information contained on these two blogs really helped me with my RESP choices and with the process itself.
How The Process Worked For Me
I filled out a TD Mutual Funds RESP application that I obtained online and mailed it in to their Markham office. Within the application I included a form that needs to be filled out in order to immediately covert the account to an e-series account. 'E-series' simply refers to a group of index funds that can be purchased online. The low management needs of these funds, combined with the efficiencies of using the Internet allow these funds to carry some very low MERs (Management Expense Ratios). MERs are the hidden fees that an investor pays for the administration of a mutual fund, ETF, or index fund. Also included in our application was our application to receive the CESG grant, which allows the government to match 20% of our contributions.
The account was set up very quickly, and TD notified me by email. The email prompted me to call TD Investment Services where I was advised that I needed an access card to get onto their online EasyWeb system. EasyWeb allows the investor to manage the entire RESP account online. I went into a TD Canada Trust branch and obtained the access card. Now that I have the card I am able to access EasyWeb, where I have switched out of the TD Canadian Money Market fund where I deposited my cash initially. I put the cash in the money market fund just to allow the funds to be held for a brief time before I decided where to transfer it for long term growth.
Why I Chose TD E-Series Funds
The merits of index investing as a way to replicate market returns for minimal cost are widely known. What I like about index funds aside from the low MERs is the fact that they are great to use for taking a no-hassle approach to investing. For this RESP account my priorities were minimal management on my part, low fees, and long term growth. I believe the following allocation, which I have chosen satisfies this:
TD Canadian Index E-Series -----MER=0.31%------30% allocation
TD U.S. Index E-Series-----------MER=0.33%------35% allocation
TD International Index E-Series--MER=0.48%------35% allocation
I plan to re-balance this infrequently if the asset allocation gets too far out of line. Obviously as we get closer to our son's first day of post secondary education the money will need to be managed more for stability of capital rather than for growth, and I'll adjust accordingly. That is a long time off right now as currently we are trying to get him to keep a soother in his mouth.