Education. It’s a topic that comes up quite frequently everywhere. We hear about it often in the news, as there are often (seemingly negative) actions from the province making moves in regards to education, such as slashing budgets. It also comes up quite often when it comes to putting together a financial plan. It’s great that parents are very concerned with their children’s education: from what subject, what school, how many years to take, part time, full time, parents have a lot to think about. What we believe should be first though, is the financial aspect. None of this will matter, if there are no funds available for the child to go to school. So, this week, let’s take a look at the costs of an education and more importantly, how we can fund it.
The latest I’ve found come from 2012. From the Office of the Chief Actuary, Office of the Superintendent of Financial Institutions Canada (that’s a mouthful) They estimate that for a child born today, who would supposedly start their post-secondary education in 2035, the basic 4 year tuition cost is roughly $85,000. Of course, for any of us who have attended post-secondary, we know that on top of tuition, these institutions of higher learning also hit you with higher charges that add on, such as random fees, textbook costs, admin costs, “improvement costs” and a whole lot of others. If the student wants to live on campus, then the estimated cost ramps up to $152,000, over the 4 years.
How will this be paid for? You have a lot of options here which we can generally break down into two categories: either 1) You don’t want to save for your child’s education, or 2) you do want to help save for your child’s education. There’s nothing wrong with option 1, as there are many people out there who paid for their education through work and loans. If that’s the case for you, however, then there’s not much information you need from us.
If you are willing to save for your child’s education, there are a few options here too: You could open up a savings account, or open up an accelerated savings plan, or use an RESP, or registered education savings plan. Each of these methods will require a lot more time than just one short article to explain, so for today, we’ll focus on the RESP option.
The benefits of an RESP. The registered education savings plan is a government program designed to encourage parents to help their children pay for a post secondary education. Perhaps the most obviously beneficial feature is the education savings grant, and education savings bond. With the grant, if someone saves up to $2500 a year into an RESP, the government will match up to $500, with a lifetime max of $7200. There is also the Canada learning Bond for families with income lower than $45,282, which provides $500 on the opening of an RESP account, plus 100 each year of eligibility up to age 15, meaning a total of $2000. From just the grant and bond, that’s nearly $10,000 taken care of. What about the rest?
This is where it helps to have a good financial plan in place, so that you can take advantage of all the different strategies available to you. Ultimately, it’s important to learn about all your options, so that you understand which ones work the best for you, and why. We invite you to sit down with us so that we can work with you and help educate you on the different ways to fund and educate your child in the future.