How to start investing for your children, which accounts to use, when the government gives you free money, and how to get kids actually interested in investing.
Compound growth is patient. A $5,000 investment made at birth grows to roughly $33,000 by age 18 at a 10% average annual return — without another cent added. That same $5,000 invested at age 10 grows to only about $13,000 by 18. Eight years of lost compounding time costs $20,000 on a single contribution.
For parents, the practical question isn't whether to invest for children — it's which account to use and what to put inside it. Canada offers two main options: the Registered Education Savings Plan (RESP) with government grants, and informal in-trust accounts for more general wealth transfers.
The Registered Education Savings Plan is the single best vehicle for saving for a child's post-secondary education in Canada. The reason is simple: the federal government adds 20% on your first $2,500 in annual contributions, up to $500 per year. That's a guaranteed 20% return before any market gains. No other investment account in Canada matches that.
The Canada Education Savings Grant (CESG) is deposited directly into the RESP by the government. Contribute $2,500 in a calendar year, receive $500 from Ottawa. The CESG has a lifetime limit of $7,200 per beneficiary and requires annual contributions of $2,500 to maximize the annual grant.
If you miss a year, you can catch up — but only one extra $500 CESG can be claimed per year in addition to the current year's grant. If you open an RESP when your child is 5 and want to maximize the CESG by age 17, you'd need to contribute $5,000/year for several years to catch up on missed room.
Additional Canada Learning Bond (CLB): Families who receive the Canada Child Benefit (CCB) and have net family income below approximately $50,000 may qualify for the Canada Learning Bond — a grant of $500 in the first year and $100/year in subsequent years, up to $2,000 total. No contribution is required to receive the CLB. If your family qualifies, the RESP should be opened as soon as possible after birth to capture the maximum CLB.
An individual RESP covers a single beneficiary. A family RESP can have multiple beneficiaries, and contributions and grants can be shared between siblings. If one child doesn't pursue post-secondary education, the funds can be redirected to another beneficiary in a family plan — making it the better choice for families with more than one child.
When your child enrolls in a qualifying post-secondary program (university, college, trade school, apprenticeship), you can begin making withdrawals. There are two types:
EAPs include the grants (CESG, CLB) and the investment growth in the account. They're taxed as income in the student's hands. Since most students earn very little income, they typically pay little or no tax on EAPs — often below the basic personal amount. CRA allows up to $8,000 in EAP withdrawals in the first 13 weeks of full-time enrollment, with no limit after that.
PSE withdrawals return your original contributions, tax-free in any amount. There's no tax owed because contributions were made with after-tax dollars and received no deduction.
The best strategy is typically to withdraw EAPs first while the student's income is lowest, and PSE withdrawals any time without tax concern.
What if the child doesn't go to school? You can transfer up to $50,000 of RESP growth to your own RRSP (if you have contribution room), keep the account open hoping they return to school, or close the account. Closing means repaying the CESG grants received, paying tax on the growth, and paying an additional 20% penalty tax on the growth portion. Keeping it open for a few years before giving up is usually worth it.
The best RESP investment depends on how far you are from needing the money. A newborn's RESP has 18 years to grow — plenty of time to ride out market volatility. An account opened when a child is 13 has much less runway.
| Child's Age | Years to Post-Secondary | Suggested Approach | Example ETF |
|---|---|---|---|
| 0–8 | 10–18 years | Growth-oriented equity | XGRO / VGRO (80/20) |
| 9–13 | 5–9 years | Balanced equity/bond | XBAL / VBAL (60/40) |
| 14–16 | 2–4 years | Conservative; preserve capital | XCNS / GICs |
| 17+ | 0–1 years | Capital preservation only | HISA / Short-term GIC |
As the child approaches 17, the sequence of returns risk is very real — a 30% market drop the year before tuition starts is a serious problem. Gradually shifting toward GICs and savings accounts in the final few years protects money you can't afford to lose.
Questrade and Wealthsimple both offer self-directed RESPs that let you buy ETFs. This is the most cost-effective option for most families. Major banks offer RESPs as well — usually with higher-fee mutual funds. Scholarship plan dealers (the companies that sold group RESPs door-to-door) should generally be avoided; they've been the subject of significant regulatory action in Canada due to high fees and inflexible withdrawal rules.
The $208/month benchmark: Contributing $208.33/month from birth maximizes the annual CESG of $500 (20% on $2,500) every year. Over 18 years that's $45,000 in contributions + $7,200 in government grants + investment growth. Many families find this amount manageable as an automatic monthly transfer.
An in-trust account (also called an informal trust or ITF account) is an investment account that an adult holds legally on behalf of a child. The adult is the trustee; the child is the beneficiary. There's no registration with CRA, no government grants, and no contribution limits.
This is where it gets complicated. CRA's attribution rules mean that investment income generated by money gifted to a minor by a parent or grandparent is attributed back to the donor. Interest and dividends earned in the account are taxed in the hands of the parent, not the child. Capital gains are taxed in the child's hands — and since most children have little or no income, capital gains may be tax-free or lightly taxed.
The practical implication: hold growth-oriented investments in in-trust accounts to maximize capital gains (taxed in the child's hands at a low rate) and minimize interest and dividend income (attributed back to you at your marginal rate). An equity index ETF like XEQT or VEQT fits this profile well.
Legal important note: Once you transfer money to a genuine in-trust account for a child, it legally belongs to the child. When the child reaches the age of majority (18 in most provinces, 19 in BC, NS, NB, NL, PEI, and YK), they can legally demand the funds regardless of your intentions. Make sure you're comfortable with that before setting one up.
Financial literacy is a practical skill, and like most practical skills, it's learned by doing — not by listening to explanations. The research on financial education for children consistently finds that early, positive, hands-on experience with money has a lasting effect on adult financial behaviour.
At this age, the concept of delayed gratification is the core lesson. A simple three-jar approach — spend, save, give — makes saving tangible. The "save" jar earns notional "interest" paid by a parent. Even a 10% weekly top-up on the savings jar teaches compounding in a way a 10-year-old can feel and see.
This is a good age to show a child their RESP statement and explain what it means. What's in the account, how much the government added, what it might grow to. Showing them the actual numbers — even rough ones — connects the abstract concept to something real. Some families let older children in this range pick one or two stocks for a small amount, understanding that individual stocks can go down as well as up.
TD, RBC, and most Canadian banks offer youth accounts with limited features. Wealthsimple allows custodial accounts in some provinces. At this age, a teenager can meaningfully engage with a simple ETF portfolio — understanding what global diversification means, why MER matters, and how the account compounds over time. The goal isn't to make a 15-year-old into a day trader. It's to make investing feel normal and not intimidating before they're 20 and have real money to manage.
Avoid over-complicating it or making investing feel like a lecture. Don't use a child's interest in one company as a reason to build a portfolio of individual stocks — that's a recipe for concentrated risk and an outcome-dependent attitude toward investing. Index funds are boring, and that's exactly the lesson you want to teach: boring is good, slow is sustainable, fees matter more than headlines.
| Account Type | Best For | Government Grant? | Tax Treatment | Key Limit |
|---|---|---|---|---|
| RESP | Post-secondary education savings | Yes — CESG up to $7,200 | Growth taxed in student's hands on withdrawal | $50,000 lifetime per beneficiary |
| In-Trust Account | General savings; beyond RESP | No | Attribution rules apply; cap gains taxed in child's hands | None |
| Parent's TFSA | Flexible savings earmarked for child | No | All growth tax-free to parent; no attribution issues | $7,000/yr (2026) cumulative TFSA room |
The sequencing for most families: open and fund an RESP first (don't leave free CESG money on the table), max the annual $2,500/year grant-eligible contribution, and then use in-trust or TFSA for additional savings beyond that.
Open a self-directed RESP at Questrade or Wealthsimple and invest in a low-cost all-in-one ETF. The government puts in $500/year just for showing up.
Compare Platforms See Top ETFsThis page is for educational purposes only and does not constitute financial advice. RESP rules, CESG grant amounts, and CRA attribution rules are subject to change. Consult a registered financial advisor or refer to canada.ca for current rules before making decisions. In-trust account legal implications vary by province.