# Self Directed RESP to Maximize Grants



## jnorman5 (Aug 21, 2011)

Good day all,

With the birth of my first child only 1 month away, like any CMF’er, I am preparing to open an RESP account. 

Up until yesterday, I had already decided on a TD eSeries account with monthly contributions. Then I discovered this thread, stating that the account will not be eligible to get other grants other than the standard 20% CESG: http://canadianmone...Investing-childrens-education-fund

Although my wife and I make $140K/yr combined, we are still able to possibly collect the Saskatchewan grant that the provincial government is in the process of working through legislature. This would be an additional 10% of contributions once passed. Since TD eSeries does not collect the Alberta grant for these accounts, I believe it is safe to assume that they won’t for the Saskatchewan as well.

I made the following assumptions based on a projected value of a series of deposits to see if it was better with the low load eSeries funds or with higher load mutual funds that is eligible for the extra 10% grant.

For the non eSeries fund, monthly contributions of $541.67 would be made ($5000/yr for 2 children [our plan], $1000 in CESG, and $500 in SK Grant money = $6500 annual contribution), with a 3% annual return, over 18 years, would leave me with $155,272.52 in the account.

For the eSeries fund, monthly contributions of $500.00 would be made ($5000/yr for 2 children and $1000 CESG = $6000 annual contribution), with a 4% annual return, over 18 years, would leave me with $158,322.21. The 4% return is used in this scenario to show an approx 1% increase in MER for similar funds between eSeries and non eSeries that would be offered through a broker such as IG, Credential, etc.

I was considering doing annual contributions to help offset the trading fees at Questrade as they do apply for the grant, but I really like the idea of dollar cost averaging as I tend to be a conservative investor.

*So after all that, here comes the question: What do you all think?* I am leaning towards forgoing the potential Sask grant (as it is not passed into law yet) and set up eSeries funds due to low MER, convenience, dollar cost averaging, and no commissions on trades. Also it appears that having an MER lower by about 1% will give me a higher return than the grant will provide.

Thanks for your help all!


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## HaroldCrump (Jun 10, 2009)

$500 over 17 yrs. is only $8,500.
You will pay more in MER, and will probably get poor performance from the managed mutual funds.
Not worthwhile, IMHO.

Also, with the TD e-Series account, you have the option in the future of moving everything to TD Waterhouse in case you want to do DIY investing.
But with the other mutual fund account, you are stuck.


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## CanadianCapitalist (Mar 31, 2009)

jnorman5 said:


> *So after all that, here comes the question: What do you all think?* I am leaning towards forgoing the potential Sask grant (as it is not passed into law yet) and set up eSeries funds due to low MER, convenience, dollar cost averaging, and no commissions on trades. Also it appears that having an MER lower by about 1% will give me a higher return than the grant will provide.
> 
> Thanks for your help all!


Consider the National Bank RESP account. It will allow you to invest in Altamira index funds that are more expensive than TD e-Series funds but will allow you to collect additional grants.

https://www.nbc.ca/bnc/cda/productf...1_navCode-13899_navCodeExTh-4100,00.html#open


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## jnorman5 (Aug 21, 2011)

Thank you both for your quick replies. I was leaning towards your response Harold, but now that I see these funds available through NBC, I think this is something to seriously consider. 

Based on a spread of only 0.3% between Altamira and eSeries, I am about $8.2K ahead with the Altamira funds, assuming a 4% return on eSeries and a 3.7% on Altamira (based on the aforementioned 0.3% MER spread).

How does the online access for NBC stack up in comparison to TD? Any additional fees for an RESP account??


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## CanadianCapitalist (Mar 31, 2009)

jnorman5 said:


> How does the online access for NBC stack up in comparison to TD? Any additional fees for an RESP account??


I can't comment on this because I have RESP accounts at TD. I once ran a post by a reader who had opened an Altamira RESP (Altamira was later acquired by NBF) who was happy with her experience.

http://www.canadiancapitalist.com/your-turn-setting-up-resps-with-altamira/


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## Four Pillars (Apr 5, 2009)

Does the proposed Sask grant apply to all contributions? Or is it like the federal additional grants and only apply to the first $500 (or whatever) of contributions per year?

One option for the additional grants (and perhaps the Sask grant is applicable) is to contribute the first $500 to an account that is eligible for additional grants. It could be a higher priced fund or just a GIC account. All other contributions would be made to the TD e-series.

One problem with National was the account fees. It might be different now, but for a small account, it was prohibitive, when I looked at them.


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## jnorman5 (Aug 21, 2011)

Four Pillars said:


> Does the proposed Sask grant apply to all contributions? Or is it like the federal additional grants and only apply to the first $500 (or whatever) of contributions per year?


From the proposal that is listed online, it will apply the same way as the CESG applies, where it is 10% of total grants, up to $250 per year. The only information that the one pager didn't include is what the lifetime limit is... I am assuming it will be in the $4K-$5K range but it was not explicitly stated.

This is all routed in a campaign promise that the Sask Party made, but due to their track record with educational grants (Graduate Retention Rebate, etc), I would put my money on it being inacted. Here is the link: http://saskparty.com/uploads/Files/BackgrounderPostSecondary.pdf

I was looking at possibly setting up the GIC and then transferring in, but it is kind of a hassle with my plan for dollar cost averaging. I went through the NBC website but I can't find one reference to account fees for the RESPs.... if it's in the fine print, they are doing a good job at hiding it! lol

Also, thank you for the post Capitalist, I will give it a read!


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## Four Pillars (Apr 5, 2009)

jnorman5 said:


> I went through the NBC website but I can't find one reference to account fees for the RESPs.... if it's in the fine print, they are doing a good job at hiding it! lol


I had to call National Bank to find out their annual fees when I assembled my discount brokerage comparison two years ago:

http://www.moneysmartsblog.com/canadian-online-discount-stock-brokerage-comparison/

The fee was $50/year for an RESP unless balance is $25,000. 

I would call to verify, but I'd be surprised if that fee has decreased. Let me know if it has changed and I'll update my comparison.


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## mesaana14 (Apr 4, 2009)

According to this page, it has not changed:

http://w3.nbdb.ca/welcome/fees.jsp?menu=1_4



> Registered Education Savings Plan (RESP)
> If the balance in the account is less than $25,000 as of May 31st, a $50 fee applies.


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## CanadianCapitalist (Mar 31, 2009)

Call National Bank and find out how to open a RESP mutual fund account. I would be surprised if a RESP account held with National Bank mutual funds charges fees.

https://www.nbc.ca/bnc/files/bncpdf/en/2/Depliant_RESP_26525_2008.pdf

A brokerage account will charge fees for low balances because that's pretty standard.


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## jnorman5 (Aug 21, 2011)

So I called NBC and they were extremely helpful. It is important to note, as CC just did above, that NBC is different from NBDB. 

With the RESP (and RRSP & TFSA... I asked since I had him on the phone), there are no account fees, trading fees, etc except for a $100 account closing fee when the account is all wrapped up in the end, and the MERs that we previously discussed. This was specifically related to the Altamira index funds.

I can easily contribute monthly just like the eSeries funds except I am able to get the other grants as well. The only down side is that I can't purchase funds online with NBC in an RESP (this is an option with RRSP and TFSA though he said), but since I am doing monthly contributions anyways, there is no concern with that. I can access my account balance online through the website, and I can even pre-direct where I would like my grant money to go, rather than just a cash account.

Thank you all for your help! I think I will do a little bit more fact checking, but my decision is almost made up.


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## Sampson (Apr 3, 2009)

In Alberta (are you referring to the Centennial grant) you do get the $500, it is simply deposited into a different cash/GIC only account.

Sure you can't invest it into your favorite eFund, but you still get the money. In Sask, I have no clue.


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## jnorman5 (Aug 21, 2011)

Sampson said:


> In Alberta (are you referring to the Centennial grant) you do get the $500, it is simply deposited into a different cash/GIC only account.


Actually, it's not guaranteed from what I read. It all depends on what RESP provider you are using. I am referring to this link here: http://www.hrsdc.gc.ca/...moter_list.shtml#T. 

I just called TD and asked them if I had a mutual fund account could they transfer the other grant to a cash account and they stated no since the MF account is with TD Asset Management technically and it is that entity that chooses not to apply for the grants for people.

I guess it's making NBC a better option... espeically after being on hold for 20 mins with TD lol


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## Sampson (Apr 3, 2009)

jnorman5 said:


> I just called TD and asked them if I had a mutual fund account could they transfer the other grant to a cash account and they stated no since the MF account is with TD Asset Management technically and it is that entity that chooses not to apply for the grants for people.


I guess these are the important details. I originally setup a regular TD Mutual fund account, put money into that, then opened the e-series account. The $500 was deposited into the original account. If you have an existing account with TD Asset Management and open the RESP within that service, I have no clue.


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## jnorman5 (Aug 21, 2011)

Well it is now two months later and I have set up my self directed RESP at... *drum roll please*... TD with a TD Mutual Fund account. I did a comparison based on the Altamira funds and e-series, and when combining the higher MER of the Altamira funds, along with the fact that they do not have a low MER bond fund, it worked out that I break even between TD and NBC for the most part. This is also combined by the fact I may not be in Sask forever. Also, NBC does not have the Sask grant set up as of yet and there is no guarantee that they will get it (although they probably will).

Although I do not yet have access to the e-series accounts (transfer forms were sent in yesterday), overall the experience has been positive. I wasn't being upsold on other accounts I do not need and the rep was very helpful in getting me in and out quickly... this may have been due to the fact that she knew that I worked for a competitor. I also set up two TFSA mutual fund accounts at the same time as I really want to set up a couch potato portfolio for those accounts as well. 

Plan is, for the first 10 years, to do 90% equities and 10% fixed income in the RESP and 60% equities, 40% fixed income in the TFSA. *One question I do have* is am I able to transfer my education savings grant from the Money Market Fund I selected (had to pick one) to another TD fund without an early redeption fee (the 2% if held under 90 days one)? The rep was not completely sure but I am certain that my fellow CMF-ers will be able to help .


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## Echo (Apr 1, 2011)

@jnorman5 - you might want to hop online at noon (EST) today for a Q&A with RESP expert and CMFer Mike Holman - http://www.moneysmartsblog.com/linkstuff-online-resp-chat-with-globe-and-mail-today/


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## jnorman5 (Aug 21, 2011)

Thank you Echo! I will definitely check this out!... I would have missed it since I kinda dropped Globeandmail from my bookmarks after the new subscription paywall... but that is for another thread


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## Echo (Apr 1, 2011)

@jnorman5 - Well, since it's the beginning of the month, you'll be able to view 10 articles for free. Make sure this is one of them


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## Sampson (Apr 3, 2009)

Mike must own the IP to his comments... perhaps he could post those here without the questions, and we can reverse engineer the questions.


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## Four Pillars (Apr 5, 2009)

Haha - that chat was a lot of fun. I could do that everyday.

Good one Sampson.


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## Maybe Later (Feb 19, 2011)

With respect to the OP's original question and Mike's response to TGAM question about the new Sask education saving grant, I don't think it is safe to assume that it will be the same as Alberta. Details have not been finalized, but it was passed into law. Press releases make it sound as if it will be administered like the CESG, but that may be my interpretation.

Dec 12 press release: http://www.gov.sk.ca/news?newsId=c3c64d75-a88e-4774-8c79-d5ae7d33939a


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## londoncalling (Sep 17, 2011)

As a follow up to this thread I thought I would post here instead of starting a new thread. I currently have my son's RESP in a Credit Union(currently all in cash) and have received the Sask grant each year. I am considering moving it to Questrade to take advantage of the free ETF purchases. Does anybody here hold an RESP account with Questrade and receive the provincial grant? I will be checking with a rep but I find the forum can often give me additional information prior to my own investigation.

Cheers


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