Yesterday we opened an RESP account for Devon. Exciting times! Both Shauna and I think that education is pretty important and we want to encourage and support the man cub as he grows in all sorts of exciting ways.
Opening an RESP account was a bit of work. There are too many options and a lot of them are terrible:
- Open an RESP through a bank (Bank mutual funds in Canada typically have high fees and low returns)
- Open a Group RESP (they have terrible fees, restrictions, forced contributions and only invest in low-return securities). I don’t understand how people are allowed to sell these things.
- Open an RESP though a Brokerage firm (buy securities directly at much lower cost, but with potentially higher risk)
Because we fully embraced the DIY movement, we decided to invest Devon’s education funds ourselves through a brokerage account. There was more work for us to do upfront, but it should minimize fees and leave more for school stuff.
To go the DIY route, we had to figure out a couple of things:
- Some basic principles of investing — this guide is awesome
- How much we’ll need — here are a couple of RESP calculators out there
- How to adjust investments as we get closer to our goal
Nuts and Bolts
The funds can stay in the RESP account for 20 to 30 years, which gives us a long time horizon. Thus, we can take on a lot of risk for the first couple of years, and then move towards less volatile investments as Devon grows up.
We are primarily investing in index ETFs as a way of reducing individual stock risk and increasing diversification.
Thus, for the first years we’re investing about 80-90% of our funds in a global mix of equity indexes and the rest in fixed income:
Right now it feels like we’re taking on an exciting adventure and we can’t wait to see where we’ll end up.