Demystification of the economy Is an RESP still the best investment for a child?

Every Saturday, one of our journalists answers one of your questions about the economy, finance, markets, etc. in the company of experts.

Posted at 4:00 p.m.

Richard Dufour

Richard Dufour

“My grandson recently turned 2 years old. Since he was born, on his birthday and Christmas, we put money into an RESP for him. We’ve been hearing for several years that it was one of the best investments the government has ever made. But is it still the case? Given the economic situation, should another investment be preferred for her future? — Leeson Bouchard

According to portfolio manager Thierry Tremblay, preference should be given to the Registered Education Savings Plan (RESP), as it is an instrument that not only defers taxes, but thanks to generous government subsidies (from 30 to 50% according to family income) allows you to obtain a “risk-free » profit, which is quite difficult to get at the moment.

“So, if your budget allows it, I suggest continuing to maintain good savings habits by saving contributions,” says an expert with iA Private Wealth Management.

With this in mind, the bigger question is how to invest the contributions and grants once they enter the RESP.

In an environment where stock markets and bond prices have fallen significantly, investment opportunities are generally more interesting than at the start of the year, says Thierry Tremblay.

The most important point to consider, he says, is the degree of tolerance for volatility.

“If you’re not comfortable with the stock market or any other more volatile investment right now, you can contribute to an RESP and keep it in cash. You can also invest in guaranteed and liquid products that will earn you small interest until the risks are reduced. »


Now, according to him, we are witnessing a confrontation between central banks and inflation.

“For several years, governments did not have to worry about this, as inflation remained within a tolerable range of 1 to 3%, allowing them to focus their efforts on growth and full employment. In retrospect, it now seems clear that the efforts to stimulate the economy were not only too great, but above all, they took too long. »

Leading economic indicators (new construction permits, consumer confidence, new industrial orders, etc.) are pointing to a rapid economic slowdown, and the stock market seems to be anticipating this scenario, Thierry Tremblay emphasizes.

He argues that falling stock markets allow investing at more attractive levels and that there is never a perfect time to invest. “Inflation has become a problem for the first time since the 1970s, and the cycle of rising interest rates does not appear to be over. »

However, says Thierry Tremblay, since our reader’s grandson has a few years ahead of him before dipping into an RESP account, it’s a good idea to allocate some capital in the stock market. But, in his opinion, it would be wiser to go gradually.

“If you’re driving in a snowstorm, do you keep the same speed as you do in the summer, or do you slow down? Why not do the same with your portfolio and de-risk as risks rise? »

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