Saving for a Child's Education

Wednesday, June 13, 2012

With the increased number of course work needed to advance nowadays, preparing for your child’s education may seem like an impossible task.  If for example your child was to pursue post-secondary education (university, college or trade school) the tuition fees and associated costs can cost up to $40,000 for a four year degree.  Many times a general degree such as a Bachelor’s degree might not be enough to be competitive in this day and age, and some will have to pursue further education such as a master’s degree.  This can be quite costly. 

There is help to help save for what could be a very costly education.  Financial institutions and the Canadian government have recognized this need for advanced savings and have set up programs to help parents prepare.

There are several options for parents to consider:

  • A Registered Education Savings Plan (RESP)
    • This Savings plan allows parents to start saving for their child.  This plan is registered in the child’s name and money earned in this account is considered tax free, until your child is eligible to attend post-secondary education.

  • Government incentives
    • Canada Education Savings Grant – An investment strategy that allows parents to contribute and the government will add 20% annually to the first $2500 contributed.  The money earned in tax free (making this essentially free earning money).
      Canada Learning Bond – If you qualify for this plan, the government will add $500 into an RESP.  The government will also add $100 a year until the child turns 15 years old to a maximum of $2000. 

  • Meet with a financial advisor to consider all your options.

  • You can borrow against your mortgage to get a line of credit to invest for your child’s education.

  • Open and contribute to a Tax Free Savings Account (TFSA), earning tax free money that you can then put towards your child’s education.

  • Start saving for your child early.  Every time your child receives money (birthdays etc.) put this money into a savings account for their education.

  • Have your child start to contribute to their own savings plan.  Encourage them to put towards some of their earned money towards their education.

  • Have your child apply for scholarships and bursaries.

Although an education is costly, if parents take the time to start saving for their child now, it will be less cumbersome when the time comes for them to pursue post-secondary education.  There are online websites to help with education savings, such as canlearn.ca which can help you determine the cost of post-secondary education, and how much money will need to be saved.