When you look at the years available to grow your Registered Education Savings Plan (RESP), you must consider that your mutual fund asset mix becomes more conservative over time.

This is especially the case when your child reaches post-secondary school – and for many plan holders, even earlier. Typically, you’ll considerably decrease your allocation to equity mutual funds and increase fixed-income funds to safeguard your RESP from the risk of a significant market downturn. If such a downturn did occur, you may lack the time for markets to recover before you need to withdraw funds. By the time secondary school graduation nears, many RESP plan holders will only hold money market funds or other cash-equivalent investments.

What does this mean when building an RESP? The earlier you contribute, the better. You want to give your growth-oriented mutual fund investments more time to grow and compound. Also, be sure to capitalize on the Canada Education Savings Grant (CESG), which provides $500 on the first $2,500 you contribute each year – up to $7,200 in grant money for each child. That’s equal to a 20% return on your investment.