Post-secondary education is an exciting chapter in the life of many students across the country. As a parent, you want to share in that excitement, but the looming costs may be weighing on your mind.
Paying for education is a concern many Canadian parents share. The good news is that there is no wrong time to start saving for your child’s education. Whether they are taking their first steps or are stepping into their first day of high school, now is the best time to start saving.
There are several options to prepare for your child’s post-secondary adventure. These four tips will help you get started and hopefully equip you with some new potential avenues for funding.
Remember to involve your child in the process. Planning for their education is a great way to introduce them to the value of financial literacy and goal setting and the satisfaction of watching savings grow over time.
How Much Do You Need to Save?
You may know that you want to save for their education, but how much do you need to put aside to ensure that their needs are met?
Understanding how much a year of post-secondary education costs is the first step. According to Statistics Canada, the average undergraduate tuition price in Canada is $6,693 for the 2020/21 academic year. You can add an average of $1,002 in compulsory fees on top of that. Add that up, and you can expect to pay over $30,000 over four years, and that’s only the tip of the iceberg.
When you consider the costs of student housing, food, transportation, and books, the bill can swell to $60,000 throughout their undergraduate studies. If your child is in diapers right now, you can expect that number to be higher as tuition fees and the cost-of-living increase over time.
But don’t let these numbers discourage you. A financial roadmap will help break this final bill into realistic and actionable steps, helping alleviate some of the stress of this intimidating sum. As they get older, share this budget and roadmap with your child to help them understand how you’re working towards this goal. They can also play a role in contributing towards the goal, through a part-time job or by allocating money towards their savings.
Note: Having trouble explaining some financial concepts to your child? The Chartered Professional Accountants of Canada (CPA) offers fantastic resources – from webinars to podcasts to worksheets – to help families talk about money management and setting financial goals.
Open an RESP
Registered Education Savings Plans (RESPs) are tax-deferred accounts designed to help save for post-secondary education. It is a smart move to open an RESP as soon as possible to help the savings accumulate in time for your child to enroll in college or university.
When you open an RESP, be sure to apply for the Canadian Education Savings Grant (CESG). This is an annual government matching program open to all Canadian children. Currently, the federal government matches 20% of your yearly contributions for a maximum of $500 annually. There is a lifetime limit of $7,200 for each child’s education. If you can take advantage of this benefit, don’t hesitate; that’s potentially over $7,000 in savings that can make a significant dent in your postsecondary savings goal!
You can invest your RESP contributions in countless ways. Talk to an RESP provider or your financial advisor to learn about your options, any fees they may charge, and contribution limits.
While your money is housed in the RESP, it grows tax-free. The money is only taxed when withdrawn from the RESP. But the good news is that since many students have little to no income, the money can usually be withdrawn tax-free or at a low tax rate.
An RESP is also an option for grandparents and other friends and family members who want to contribute on birthdays or as a Christmas gift.
Apply for Student Aid
Perhaps, like many Canadian parents, you’ve worked hard to save a healthy sum over the years to help your child pursue post-secondary education. But the reality is that with the rising cost of tuition, paying for the entirety of your child’s education may still be out of reach. There is help.
If you need extra financial assistance to cover some of these costs, government grants and other forms of student aid, including loans and scholarships, are available. The amount your child may be eligible for depends on many factors, including what province you are in, your family income, if your child has a disability, and more.
You and your child can explore scholarships and grants to secure funds to help cover some of your child’s post-secondary education. Be sure to do this early, as application deadlines and requirements vary. Give yourself time to meet all the submission guidelines, particularly if the application features an essay component. The federal government provides many resources for student grants and loans, scholarships, apprentice loans, and grants. You can view them here.
Foresters Scholarship Deadline is This Month!
If your child is preparing for postsecondary education for the 2022/23 academic year, they may be eligible for a Foresters Competitive Scholarship. Every year Foresters awards 300 tuition scholarships up to $2,500 to students committed to making a difference in their communities.
Foresters Competitive Scholarships are open to Foresters members, spouses, children, and grandchildren. Students in the first, second, or third year of their postsecondary education can apply. Applications are due February 27, 2022. View the full eligibility criteria and start your application process today.
Save Early, Earn More!
Now is the best time to start saving for your child’s future and empowering them with the skills to do the same. Even small contributions each year can lead to significant savings that will help minimize their financial stress as post-secondary students and prevent them from being saddled with crippling debt upon graduation. Intelligent financial planning as parents is, without a doubt, a gift that keeps on giving!
When purchasing a life insurance policy with Canada Protection Plan you may be eligible for many complimentary benefits – including competitive scholarships. Read about our member benefits here and contact your advisor or call Canada Protection Plan today.
BLG676-0221EN