Food, clothing, sports, music lessons – the costs of raising children can be overwhelming. So how do you also put money aside for their postsecondary education?
“Start saving as soon as you have the financial resources to do so,” says Professor Rick Robertson, a Chartered Accountant and associate professor at the Richard Ivey School of Business at the University of Western Ontario in London. “You will need the equivalent of $80,000 to $100,000 in today’s dollars for a four-year university program.”
Tuition fees will account for a great deal of your child’s postsecondary education costs, but don’t forget about other expenses.
“Lodging, food, transportation and books are other significant costs,” says Professor François Brouard, a Chartered Accountant and associate professor at the Sprott School of Business at Carleton University in Ottawa. “And if your child wants to go to school overseas, it is extremely expensive.”
A great way to save for your child’s postsecondary education is to start a Registered Education Savings Plan (RESP). “If you start early and maximize your RESP, the hope is that you will have the money available when the time comes,” says Robertson.
The federal government has eliminated the annual RESP contribution limit. The total RESP lifetime contribution limit for each beneficiary is $50,000. The federal government will also pay a Canada Education Savings Grant (CESG) to your child’s RESP. On the first $500 you contribute per year, the federal government will contribute a CESG of between $100 and $200, depending on your income. The maximum lifetime Canada Education Savings Grant per child is $7,200.
Low-income families with children born after December 31, 2003 are also eligible for a federal Canada Learning Bond, which contributes $500 to an RESP in the first year and $100 for each subsequent year for up to 15 years.
“Another way to save for your child’s education is to put money in one of the new Tax-Free Savings Accounts (TFSAs),” advises Brouard. The TFSA would be put in the name of the parent or guardian, not in the name of the child.
Student loans, grants, scholarships and bursaries can also be important sources of funding for postsecondary education. “Universities are becoming far more aggressive in offering scholarships for high academic performance,” says Robertson. “You should also take the time to research local scholarships and apply for them.”
Adds Brouard: “Your employer may also offer scholarships for your child’s postsecondary education or a summer job program.”
When developing a financial plan to save for your child’s education, be sure to talk to a Chartered Accountant. “A CA can assist you with designing a budget that includes saving for your children’s education through RESPs and TFSAs,” says Brouard.
Robertson adds that a CA “can help you understand the magnitude of the challenge and develop a plan to help you get there. “Starting early is a big advantage.”
The Institute of Chartered Accountants of Ontario is the qualifying and regulatory body of Ontario’s 33,000 Chartered Accountants and 5,000 CA students. Since 1879, the Institute has protected the public interest through the CA profession’s high standards of qualification and the enforcement of its rules of professional conduct. The Institute works in partnership with the other provincial Institutes of Chartered Accountants and the Canadian Institute of Chartered Accountants to provide national standards and programs that are used as examples around the world. </em>
