Smart saving tips for your child’s higher education
The first few years of parenthood may be filled with sleepless nights and constant worrying about providing a healthy home for your children. There is no reason to add stress to your already overwhelming responsibilities when you start thinking about the cost of sending your children to college. It may seem like an eternity before your kids are ready to head to college, but the day will come before you know it.
A study carried out by Maclean’s estimates that you could end up spending over $19,000 a year on post-secondary education, which means almost $80,000 per child over the course of a four-year degree program. Those kinds of numbers can seem like an intimidating goal, especially if your kids are still in diapers. The key to staying on top of your educational savings is to start as early as you can.
Contributing smaller amounts of money on a regular basis can add up over your child’s lifetime. No one wants to end up scrounging for tuition fees during their senior year of high school. With a bit of planning and innovative investment, you can secure sufficient savings to help put your child through college.
In this article, we will explore a few smart strategies to help you start a savings budget for your children’s education. From investing in a CST RESP to recruiting family and friends to contribute to your savings goal, there are plenty of strategies to help you save for your kids’ college tuition.
Retirement Education Savings Plan (RESP)
Opening a flexible RESP for your family or a child is a smart savings strategy for your child’s education. There is no minimum annual investment to worry about and you can add money whenever you wish. You can also open your plan up to receive deposits from family and friends who wish to donate.
The government will match up to 20% of your first $2,500 of savings per year with a maximum of $500 per year to a lifetime maximum of $7,200 per child. This means that over a period of 17 years, you could save an additional $8,500 from the government. That amount could be equal to an entire year of tuition for one of your kids.
The most important benefit of opening an RESP is that your savings will remain safe. Your total savings can only be spent on educational costs, making it resistant to emergency withdrawals or market fluctuations.
Involve Your Family
They say it takes a village to raise a child. If this is true, you can look to your family and friends for some help with your child’s college savings. Talk to grandparents, immediate family, and friends about making donations to an educational fund instead of traditional gifts for birthdays, Christmas, and special occasions.
Your family contributions should include your future college student. Once your child turns 14, they can legally work in Canada. This means that they can start earning their own money, and some of that can be set aside to help pay for their tuition.
Most people take out a life insurance policy as extra protection for their family if they are to die early. In fact, your life insurance policy can be used to benefit your family before you pass. Parents can take out a loan on the cash value that has accumulated in their insurance policy to use towards educational costs. In some cases, this loan is tax-exempt. The one drawback is that until the loan is paid back into the policy, the death payout will be reduced in the amount of the outstanding loan.
Dedicated Savings Plan
A non-registered savings plan in the form of a high-interest savings account is preferable for some of the flexible benefits. Your account can be managed however you want with no minimum or maximum restrictions.
You can use your savings for more educational costs apart from tuition. Housing costs, books, and travel expenses can be funded from this kind of savings account. One drawback of a dedicated account is that it is not regulated or protected, which means that parents have to remain vigilant and resist using that money for other unexpected expenses.
Grants & Scholarships
As your child enters the final two years of their high school career you can start to explore funding options for college in the form of grants and scholarships. Talk to your school’s guidance counselor about what benefits your child may qualify for. Get your applications in early and your child may be able to enjoy school funding that will not be added to their educational debts.
Post-secondary education, although expensive for families, can benefit your child for the rest of their lives. According to Statistics Canada, students that complete a Bachelor’s degree will enjoy 57% more job opportunities with higher salaries. Start the conversation about college with your kids early and make a plan to help save for their future.