Unfortunately taxes always get you. Assuming even a low tax bracket of 33% you would get taxed $1k and the grant will still only be $500. Now I will say that you might be able to take that approach via canadian dividends but you may need to earn as much as a 6% yield and you would have to been in the right tax bracket. I think its something very difficult to acheive in good times when yields are super low. I think at that point you might be exposing your childs education to to much risk.

But I question what the right approach is if you have 50k right now. What if you put that 50k in a non-registered account and pull say ~$3k out yearly for 17 years? That way your $50k is in the market for the whole time period, but you also get all the grant money. The only downside are the tax implications, but it might still come ahead of the “drop $50k in the RESP off the bat” plan.

Inflation and the value of money does play big part in how the contributions affect you financially in the present (ie. contributing $50k now costs a lot more then contributing $50k 10 years from now because $50k will be worth less in the future). However it has very little barring on the final outcome. The difference is simply the outcome of compounding returns. The more you contribute early on the longer it has to compound and grow.

I’m glad the article could be of help in making your decision. I wrote it because I found myself wondering what the best approach was to capturing all of that grant money and then ultimately realizing is it’s actually not worth going
after the grant money.

Now the only downside is you lose the ability to dollar-cost-average from contributing every year (mind you DCAing has proven to be ineffective as well but it makes us feel better) and you run the risk that you invest at a high point in the market if you do the lump sum payment. You might be able to mitigate this with a conservative portfolio and annual rebalancing though I haven’t crunch those numbers myself to confirm if that’s true but that’s the theory.

I’d also like to thank you for pointing out the typo. The amount is actually “$117,957″ so I don’t know where I got that other number from . You’ve got to be careful with that copy and paste.

One quick questions, though — I assume that the Plan 1, 6% should read “106,763″ and not “196,73″…