#InvestingTruths: Planning for My Kids' Future

We spoke to parents about how they're building toward their kids' futures, and for many, education was a key piece of the puzzle. Here, some of them share what that means for them.

“There are a lot of questions as to what postsecondary education will be in 15 years," says Sturgeon Falls, Ont.-based Rejean¹, 32. “It may be entirely online. It may be more trades-based. But I know there's going to be some expenses associated to it." That's why the father of three opened an RESP account about a year and a half after his first child was born. That, and the fact that the Canadian federal government provides a 20 per cent top-up on contributions – up to $7,200 per child – via the Basic Canada Education Savings Grant (CESG). (Learn more about government educations grants.)

"Free Money" Is a No-Brainer

Madison¹, 26, was also motivated by the CESG grant money. In fact, that's what motivated the Prince Edward Island-based accountant to try out self-directed investing. "I started investing with the RESP for my daughter, because that's free money, basically," she says. "Free money" is how 33-year-old Brad¹ views the grant, too. The Winnipeg-based program manager has three daughters under the age of five ("we have a busy, busy house," he says), so the funds were very welcome.

For Brad, an RESP is a no-brainer, but he finds not enough new parents are aware of the CESG. "When they've got a new baby, they're thinking about a lot of other things," not the 20 per cent grant or its compounding potential, he says. To Brad, it's too bad. "There's a lot of money there and value that people are leaving on the table just because they maybe don't understand how easy [an RESP] is to set up and manage." (For more information about how RESPs work, check out 9 Common RESP-Related Questions & Answers.)

Family RESP Is a Thing

Another thing parents aren't necessarily aware of, says Rejean, is the difference between an individual and a family RESP account. It wasn't until his second child was born that he learned he could have opened one account that would cover his first and any subsequent children. Unaware, he had opened an individual RESP for his firstborn. Switching the original account over to a family RESP required some logistics, says Rejean. But when his third child was born, says he, "it was pretty seamless. I just filled out a form."

"It made total sense," says Brad of opting for a family RESP for all of his kids, "but I think you could easily not know it was there as an option." Brad enjoys the cost savings of a single account. "For me it's just way simpler having one [place] to look at and rebalance," he says, adding that he would have to pay more transaction fees if he had multiple accounts.

The Time Horizon Is Built In

As a colleague of ours aptly put it: with an RESP, the time horizon is "built in." With a relatively long but fairly set timeline, Madison finds investing for her daughter's future quite straightforward. So far, things are going well, she says. "And I think by the time that she's ready to go to university, there should be a sufficient amount of money in there," says Madison. "If not, then hopefully, she'll be smart and get a scholarship." Rejean has been maxing out his contributions so far, but, he says, "It may not always be that way, because I don't see the need for them to have a six-figure education fund."

For Sarah¹, 38, the time horizon is about more than just accumulating cash for her two sons' educations. The Quebec-based investor would also like to teach the boys, aged eight and five, a lesson along the way. "I honestly value education. I have a bachelor's, a master's and a PhD in engineering," says Sarah, who is currently working in oceanography research. To take full advantage of the CESG, Sarah intends to slow her contributions and have the kids take part. "I don't want to save it all for them. I didn't get any help when I went to school. I think there's something about kids paying for their own education that makes them take it more seriously."

Education and Beyond

"My vision for my children's education is they can do whatever," says Sarah. "If they want to be a doctor or an electrician — by all means." Rejean has a similar view of his kids' RESP. "It could be used in a variety of different ways. It could be used for education. But it could also be used for education-related expenses once they do graduate from high school, like living expenses, if they are pursuing education, or tools if they're going into a trades program." (Learn more about how you can use your RESP account here.)

Raising the Next Generation of Investors

On top of his efforts to support his girls in their educational pursuits, Brad plans to teach them about finances, and he won't be waiting until their post-secondary years. "That lesson of compounding interest is so big, and just the idea of saving early on," he says. "That's something that really stuck with me as a little kid, and kind of transfers as you're an adult." Brad plans to open practice accounts for his daughters when they're a bit older. "The ability to have a practice account is kind of neat," he says, "even for young people." He wants to make a game out of it. "Here's a tool. Give it a shot," he'll tell them.

**This article was updated on November 13, 2020.