Contribution and investing strategies should be adjusted as children get closer to university or college
Young children have a long time horizon for post-secondary education. That translates into an opportunity to invest for generating growth, based on the parents’ risk tolerance. But that time horizon shrinks as children get older.People often think of registered education savings plans in terms of contribution years and withdrawal years, but it can be helpful to break contribution years down further.
“Getting started is sometimes the most difficult step in the process, so to get the account open and even get a small amount of money going in automatically is great,” Ms. Dean says. If parents haven’t been able to take full advantage of those early CESGs, they may want to encourage family and friends to consider a birthday gift that goes toward a child’s education.
Especially as the window shrinks to five years or less, she recommends reducing risk by moving at least a portion of RESP savings into cash or a laddered guaranteed investment certificate or bond strategy. So, when Mr. Homer starts working with parents who have a teen aged 15 or younger, he makes sure they’re catching up on contributions so they remain eligible for the CESG at ages 16 and 17.
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