Published at 4 September 2023

What investments can you hold inside an RESP?

So, you’ve decided to open a registered education savings plan (RESP) to save for your child’s education. What’s next?

Are you curious what the most appropriate RESP investments might be for you? When you meet with an advisor to set up your registered education savings plan (RESP), they’ll ask how you want your contributions and government grants and/or bonds to be invested.

RESP investment options

There are many investment options, including:

  • guaranteed investment certificates (GICs),
  • stocks,
  • exchange-traded funds (ETFs), and
  • mutual funds.

In most cases, you can choose from two RESP options:

1. Fixed-income investments:

Fixed-income investments pay you a set interest rate. So you’ll know what to expect from your investment returns. Fixed-income investments include products like short-term bonds and cash held in an investment savings account.

These investments are typically more secure and less volatile than equities (stocks and shares). The downside? When interest rates are low, so is the income earned.

2. Mutual funds:

Mutual funds are pooled investments consisting of a group of stocks, bonds, or other securities.

Mutual funds are managed by professionals. They make investment decisions for the fund with the goal of increasing its overall value. This means you will profit if the funds you’ve invested in go up in value.

Historically, these types of investments have provided the highest long-term rate of return. The downside? Their short-term value can go up and down. The advisor who sets up your plan can help you determine the best mix of investments for your situation. This will be based on:

  • The age of the child you’re saving for. Equity investments can be a good choice for a younger child’s plan. This is because they provide the greatest opportunity for long-term growth. But they’re not so good for teens who only have a couple of years until college. That’s because their short-term value can fluctuate. For older kids, fixed-income investments may be a safer investment alternative.
  • Your personal risk tolerance. This is something only you (with the help of your financial advisor) can determine. You may be asked to complete a questionnaire to help determine how comfortable you are with risk.
How to invest in RESPs

When investing in your RESP, consider these two tips:

  • Select a balanced mix of investments.
  • To ensure the plan will grow and the money will be there when it’s needed, work with an advisor. They’ll help you gradually shift your investments to fixed-income as the date the child needs the money approaches. This date occurs once they are enrolled in a qualifying post-secondary educational program.
A final note about RESPs

Before choosing an RESP provider, here are some things to consider:

  • Fees. Each provider may have different fees. Ask providers to explain all the fees associated with an RESP.
  • Deposits and withdrawals. Review the options for deposits and withdrawals. See if it’s easy to set up, contribute, and make withdrawals.
  • Investment options. You can hold a range of investments in an RESP account. These options all have different risks and rates of return. Not all advisors offer all types of investment options. So, ask your advisor about what they offer and what would work for you and your family.