How an investment expert plans for rising education costs

According to Mr. Keaveney, an education savings goal typically requires a significant share of a family’s financial resources. For that reason, he warns against thinking of RESP contributions as a one-off commitment. 

“Setting up things like a regular investment plan allows you to fund the goal on a regular basis, like an important ‘pay-yourself-first’ commitment amidst all the other financial obligations you’re inevitably going to have while you are raising children,” he notes. 

Regular contributions also allow families to capture every dollar of government support available. Ms. Lucreziano calls out the grants families may lose out on if they wait too long to start: Through the Canada Education Savings Grant, the federal government matches 20 per cent of RESP contributions, up to $500 a year to a lifetime maximum of $7,200 per child. Lower-income families may also qualify for the Canada Learning Bond, which requires no personal contribution to receive.

To maximize growth while managing risk, Mr. Keaveney says the right investment mix should shift over time. “In the world of RESPs, the long term eventually becomes the short term,” he says. 

Early on in a child’s life, when the time horizon is 15 to 20 years out, more growth-oriented investments may make sense. As their enrollment date nears, a more conservative approach helps protect savings from short-term market swings — like the kind seen during the 2008 financial crisis or more recently, COVID-19. 

To help families plan ahead, CIBC recently launched a suite of five target-date Education Portfolios. They are aligned to 2030, 2035, 2040 and 2045, along with a Graduation Portfolio for families closer to needing the funds. Each portfolio’s mix of stocks and bonds adjusts automatically as the target date nears. 

Still, Mr. Keaveney is clear that no single product fits every family. “It’s very important to discuss with your financial advisor which of these options are right for you, because proper advice is tailored to your own individual circumstances,” he says.

Another benefit of an RESP is that it’s flexible if your child’s life doesn’t follow the expected path. Accounts can remain open for up to 36 years, funds can often be redirected to a sibling and unused savings can, in some cases, move to a registered disability savings plan — RDSP — or be transferred to an RRSP. Apprenticeship programs may also qualify for withdrawals. 

Beyond adapting to a child’s path, an RESP can also play a role in shaping it because it can be a useful tool for teaching kids about money. Ms. Lucreziano encourages families to bring children into the saving process as they get older, whether that means walking through an RESP snapshot together or letting a teenager contribute a portion of their part-time paycheque. 

“You’re building habits, confidence and a real understanding of value,” she says of this process. 

Mr. Keaveney agrees that giving children a small, direct role in saving for their own education — like contributing some of their own part-time earnings, for example — can make the goal feel more real to them than a fund that just builds in the background.

Saving for education needs to fit into the mix of other financial obligations and milestones, including retirement contributions, tax planning and estate goals. For families juggling multiple priorities, working with a CIBC advisor can help determine how RESP contributions fit alongside those goals. 

As Mr. Keaveney puts it, financing a child’s education is one of the most important financial ambitions for many Canadian families, but taking the first step doesn’t require having every detail figured out in advance. “Getting started is actually as easy as speaking with your financial advisor who can advise you on a lot of these things.”