The low risk at withdrawal time is a common theme and I have been thinking about it a lot as I am trying to make up my mind.
However, the low risk options really don't even cover inflation these days. Even with one child at 13 they will only start drawing from the RESP in 4-5 years and will like draw for 3-4 years which makes it a 7-9 year investment timeframe. Longer timeframe for the younger one. I could just change the asset allocation just keep increasing the percentage of bonds each year but then my return is likely to be reduced.
I guess it is really all about the amount of risk you a comfortable with. If the market does tank for multiple years it could really affect how much the children would have. If this is the case I would have the choice to supplement with additional non-RESP money, but on the plus side if I get an average of 9% they would have enough money to attend a good university.
My RESP Plan is contribute to ensure I get the maximum $7,200 in grant money for each child.
That works out to contributing $2500/year per child which will give $500 grant money until the child is 14. In the 15th year I will only putting in $1000 to get the final $200 in grant money.
I am hoping that with capital gains and return on investment will turn this $42,200 into the amount required to attend college or university.
They say it will cost $100,000 to attend university ,but I figure that is the banks trying to scare us into saving more in there high fee mutual funds. I was doing just that for the past 12 years until I started reading websites like MMM. The rate of return was under 5% and I was paying MER fees averaging 2.5%.
To turn this $42,200 into the 100k I am looking for 9% return.