Reader Tim managed to jump through the hoops to set up a TD Bank e-Series Funds RESP account for this two children and has the following question:

My plan is to invest approx $100 to each of the 2 plans every two weeks in order to qualify for the maximum government match. I want to take advantage of dollar cost averaging but the problem is that there seems to be a minimum of $100 investment for each of the funds. I was hoping to diversify between 4 e-funds but it would seem I have to invest more money or invest less often in order to do that.

As I tend to invest a lump-sum amount into our kids’ RESP, I don’t have experience with investing regularly in a RESP. But I think Tim can invest regularly by setting up a Pre-authorized Purchase Plan for the TD Money Market Account. A Pre-authorized Purchase Plan (PPP) allows investors to invest as little as $25 on a regular basis — from as often as every week to as infrequent as once a year. The PPP can be set up for purchasing $100 of the TD Canadian Money Market fund for each of the two accounts. Every other month (or so), the account should have enough contributions plus CESG payments in the money market fund to switch into other e-Series mutual funds. Use this automatic rebalancing spreadsheet to figure out how to divvy up the holdings in the money market fund.

Another option is to set up a PPP for each of the e-Series mutual fund in your portfolio. If you are planning on purchasing four e-Series funds, you’ll set up a contribution of $25 (the minimum required for a PPP) for each fund for a total of $100. The CESG is deposited into the account in a money market fund and can be used to rebalance the portfolio, say once every year. Note that all the PPP purchases made on the same day in one account show up as one transaction in the chequing account. I’d like to hear your opinion if you have set up a RESP account and invest in it regularly.

[Note: The original post incorrectly mentioned that each mutual fund purchase via a PPP is treated as a separate chequing transaction. Thanks to readers who pointed out the error in the comments.]

This article has 30 comments

  1. Your description of the money market account is exactly how I handled my setup for my son in the TD E-Funds account. Though contributions have stopped now for a while, when they were going I would stop by anytime I thought about it to see if I had enough to move around in to their respective indexes. Since it’s all accessible from anywhere you have internet access it’s simple to log in and move some funds when you think it’s a good time.

  2. CC, to simplify the approach you suggest, it’s possible to DCA monthly.

    I contribute $25 / month to each of the 3 “main” equity efunds – International, US, and Cdn. This generates $15 / month in CESG, which TD allows me to park in the Cdn Money Market fund. Once that builds up to $100, I move it in the Cdn Bond efund.

    So, to clarify – you can set up a PPP for as little as $25/month. The $100 minimum applies for one-off purchases.

  3. We have my son set up with TD. We deposit all money to the money market fund and then the CESG is also deposited to the money market. Every 3 months I transfer the builtup money into the equity/bond funds to suit the allocation we’re aiming for. Dollar cost averaging doesn’t have to be done every month, just regularly like every three months. This way The money is put to work earning interest right away and I don’t have to spend too much time monitoring and adjusting.

  4. “While a PPP can probably be set up to invest directly in the TD e-Series funds, each purchase would count as a transaction and would result in eight transactions compared to just two for purchasing a money market fund. ”

    The above statement is not completely accurate. I spoke to TD before signing up, and they said that it would depend on how the bank that the funds’re sourced from handles this. They said that if you have a TD bank account, and all funds’re being purchased on the same day, it would be a single withdrawal transaction.

    I don’t have a TD bank account, but ended up seeing the same. I purchase individual funds directly on a pre-authorized basis on a single day in a month, but it shows up as a single transaction in my chequing account.

    The CESG, when it comes in, is used to purchase units of a Money Market fund, and once in 6 months, I move it to purchase additional units to match my desired allocation.

  5. I agree with Rajesh – I think in most cases the fund company (TD or otherwise) will only submit one withdrawal transaction for the total PPP amount.

  6. I should clarify my comment – in most cases there will be 1 bank withdrawal transaction PER mutual fund account.

  7. I can confirm what Rajesh and Four Pillars wrote – I have PPPs set up for 2 TD e-Series mutual fund accounts (TFSA and non-registered), each with 4 different funds. On the transaction day, I end up with 2 withdrawals in my TD chequing account, one for the total purchase amount for each mutual fund account.

  8. Canadian Capitalist

    Rajesh, Mike, Jeff: Thanks for the correction. I’ll update the post to reflect it. I’ll mention that setting up a PPP for each of the e-Series fund purchase, letting the CESG accumulate in a Money Market fund and use it to rebalance the portfolio every few months.

  9. CC I appreciate you posting my question and thanks for all the help from everyone else.

    I finally got around to getting this going and I purchased the initial minimums for my 4 funds for both accounts and was just about to setup the PPP.

    I was wondering how it would handle doing 8 transactions every few weeks. I like the simplicity of the PPP to a money market fund and just to clarify I won’t be charged anything for switching the investments from the money market to the e-series funds, right?

    Rajesh, does the CESG automatically purchase the money market fund or did you have to set something up for that to happen.

    Thanks.

  10. Canadian Capitalist

    Talkinggoat: Yes, there is no minimum holding period for the money market fund. That’s exactly how I have set up our accounts. I made one purchase transaction to buy the money market fund (that would be my RESP contribution for the year) and a couple of days or so later, switch into the four e-Series fund in the portfolio. I’ve never been charged a fee for switching out of the money market fund. Also, the CESG shows up in the money market fund about 4 to 8 weeks after the contribution.

  11. Talkinggoat,

    I opened the RESP account as a TD Mutual funds RESP account at a branch. As part of opening the account, there is a section titled “CESG Fund Allocation”. I elected to put 100% into the TD Money Market Fund.

    On conversion to an E-Funds account, the same instruction carried over.

  12. CC: The amounts involved in each transaction is very small. I am wondering if everyone doing this will increase the costs involved on TD’s part. As result, wouldn’t TD increase its MERs of TD e series as a result?

  13. One other point I should mention is that “switching” from the Money Market fund, once sufficient CESG grant has been accumulated in that fund, to an e-series fund is not considered a pre-authorized purchase, and a minimum purchase of $100 of a fund is required.

  14. I just had a look at the RESP website and it sounds like both child and parent(s) need a SIN number. Then I look at the requirements for a SIN number and it sounds like only children aged 12 and older can get a SIN number. So does that mean I have to wait until my child is 12 to get an RESP? Am I wrong?

  15. Oops, looks like I didn’t read far enough. Here’s what it says:

    Children who are 12 years of age or older may apply for their own SIN.

    Parents and legal guardians can also apply for a SIN for children under the age of majority of their province.

    I didn’t read the second paragraph.

  16. Just to clarify, I have setup exactly what the poster wants. I made an initial deposit of $100 in each of the funds, and then make monthly withdrawls into each fund (roughly 20/20/30/30 bonds/us/cdn/int’l equity) and the match from the government goes into money market fund. So I put in $208 each month (total $2500 for the year) in e-funds and two months later I get $42 in my money market fund, which I can then switch into one of the funds already opened. The hard part is keeping the math straight. So though you may need $100 for an initial deposit in a fund, you don’t need to put in $100 each time.

  17. Canadian Capitalist

    EconStudent: I’ve heard the RESP is a kind of loss-leader — institutions offer it for the sake of completion and would rather not have to deal with it considering the amounts invested are rather small and the participation rate is fairly low. Still, I can’t imagine the RESP accounts increasing TD’s overall costs for e-Series funds as they are set up and managed online by DIY investors with minimal manual intervention.

    Rajesh: Thanks for the clarification. I recall now that I did the same thing: opted to put the CESG into a money market fund when I first established these accounts.

  18. Our TDW RESP is a family account. I deposit the same $200 every 2 weeks for our 2 kids to max out the CESG. I have a spreadsheet keeping track of each kid’s share, but in the event one kid doesn’t go to school over my dead body, the money can be used for the good kid. (j/k)
    Then I look at our allocation and buy the e-fund that’s lowest in the mix to rebalance and don’t bother splitting every 2 weeks. They leap frog a bit, but after a couple years the percentages are quite close to target.
    Also, I don’t exactly use PPP. I have set up a transfer like a bill payment to the account #. Works from any bank – I use 2 banks neither is a TD account. Then I don’t have to go in and can change it, or add a bit if Granny gives us some $ for the kiddies as happens from time to time.

  19. I have recently setup the TD eFunds RESP account for my daughter. One question I forgot to ask was whether I will get money back after 18-2o years if my daugther does not want to pursue higher studies? If I do, would it be = my contributions PLUS growth on my contributions PLUS growth on government contributions MINUS government contributions OR some other formula? Ignoring the MER here. I called a TD rep and she said that I will ONLY get my contributions back in this scenario and I will not get any growth. I do not think that is true. I checked the agreement but did not find anything conclusive. Any one knows this for sure? Thanks a lot for any help.

  20. To MJMann, here are the rules if you child does not use the money: http://www.canlearn.ca/eng/saving/resp/nce.shtml

    As an aside, this is an absolutely crazy process to set this up. I do not have a TD account so here is my story:

    1) Went to my branch and set up a TD mutual fund account (money market).

    2) Went home, printed out the transfer sheet and waited 2 weeks.

    3) Received email indicating that I need Easyweb to access the funds. ( I knew this).

    4) Call the first number indicated in the email (which doesn’t work). Then called the general help number to set up Easy Web access.

    5) Turns out, you need an access card which can only be issued at the branch. Go back to square one. Rinse and repeat if necessary.

    On top of this, I know that I cannot do lump sum payments into the e-series even if I have a pre-authorized payment plan set up. I will have to send a cheque in the mail.

    They really want you to bank at TD to use this product.

  21. Al – I just tried to explain – you can make a deposit by doing a bill payment to the RESP account number from ANY bank.

  22. Thank you Florch. That is a good tip. I think most of my problems are arising from the fact that I think I know what to do and no one at TD seems to be able to proactively correct me.

  23. I agree with that being a problem at TD. Their helpfulness runs out in the branches when you start doing self directed or e-series. This is another reason why doing it as a bill payment is helpful. You don’t need to deal with anyone – just do it online – if it works, you did it right.

    Thankfully, Waterhouse’s phone help is pretty good, the guys and girls are knowledgeable and helpful which is refreshing for telephone service.

  24. Florch,

    I am trying to add TD RESP as bill payee from my scotiaback but can’t seem to add. Would you know under which financial institution you would add TD RESP account#.

    Thanks.

  25. Clueless, I had mine set up as a pre-authed payment from the TD side, so it worked like an automatic mortgage paymetn, you can set it up in your TD online access area.

  26. Traciatim,

    I don’t want to do pre auth payments for two reasons.
    a)- I want to make a bulk payment towards RESP
    b)- I want to contribute only when i have money

    I found TD waterhouse as financial institution in my Scotia online and my Spouse’s RBC online portal. Is thats what e-series account would fall under.
    Thanks,

  27. Canadian Capitalist

    clueless: Do you already have a TD RESP account (Florch has a Waterhouse account)? Is it already set up for e-Series funds — i.e. do you have online access through EasyWeb?

    If you already have online access, your TD Mutual Fund account is already set up to pull money from the checking account through the void cheque you provided when opening the mutual fund account. All you have to do is buy $x of any mutual fund and TD will pull that amount out of your bank account. If it is a RESP, $x will be your contribution.

  28. CC,

    Thanks for the clarification.
    Yes i do have TD e-series and online access and i gave them void cheque for opening the account. However i want to transfer some funds from my spouse account. I am wondering if i can add TD series as bill payee and transfer any funds.

  29. Hello all,

    If you are getting an additioan CESG grant then what is the way to invest in TS RESP E series Account.

    Thank You!

  30. I don’t know if it was mentioned. I have an RESP account with TD and I have it set up the so that the grant money goes into a money market fund that I transfer each month into one of my four main funds. You can transfer less than $100 if you click transfer all the funds in that account. That is why I have it set up to go into a seperate account.