Parents are finding it tougher than ever to save for their childrenB次元官网网址檚 post-secondary education as the rising cost of living ramps up financial pressures.
But the mainstays of post-secondary saving B次元官网网址� RESPs, especially B次元官网网址� remain key tools, as do clear goals and plenty of planning.
Julie Petrera, a senior strategist for client needs at Edward Jones, said the first step is getting a handle on cost estimates, which can range from thousands to hundreds of thousands of dollars, depending on the type and length of schooling and whether the child is leaving home.
Other considerations include whether family members, such as a grandparent or the child themself, will contribute and where education ranks on parentsB次元官网网址� list of savings priorities.
B次元官网网址淎re they paying for post-secondary education and saving for their own retirement and funding other expenses, like renovations and vacations?B次元官网网址� Petrera asked.
According to an online survey of 1,000 parents with at least one child under 18 by Embark, a company specializing in education savings, some 73 per cent of parents said saving for college and university has been harder recently.
The survey also found just over half of respondents said they would go into debt to pay for their childB次元官网网址檚 education.
The Registered Education Savings Plan (RESP) offers a tax-deferred investment account that has been used by millions. More than 481,000 students withdrew funds from an RESP in 2021, according to Employment and Social Development Canada.
Ottawa matches 20 per cent on the first $2,500 put toward an RESP each year, via the Canada Education Savings Grant (CESG), for a total of $500 per year, with higher rates available to lower income families. The lifetime maximum grant amount is capped at $7,200, while total contributions to RESP accounts are limited to $50,000 per beneficiary.
Low income families may also be eligible for the Canadian Learning Bond, which does not require RESP contributions.
RESP beneficiaries in British Columbia may be eligible for an additional oneB次元官网网址憈ime $1,200 grant, while those in Quebec can enjoy a refundable tax credit with a lifetime maximum of $3,600.
B次元官网网址淭he RESP is great. It is designed to help with affordability,B次元官网网址� Petrera said. B次元官网网址淏ut on the flip side there are some restrictions on these plans B次元官网网址� on who can withdraw the funds, when they can withdraw them and why.B次元官网网址�
RESPs can comprise a major part of a familyB次元官网网址檚 education funding, but should not be viewed as a B次元官网网址渟tandaloneB次元官网网址� plan, Petrera said. Non-registered investment accounts offer a supplementary option.
B次元官网网址淭here are no grants associated, they are fully taxable, but they have no restrictions. You can put money in up to any amount and withdraw at any time for any reason,B次元官网网址� she said.
A tax-free savings account provides another vehicle. Students themselves canB次元官网网址檛 open one until they reach 18, but parents or grandparents can use their accounts to help save.
B次元官网网址淢y advice on that would be to work with an adviser or work with a professional that understands the pros and cons and the ins and outs of all of these plans to determine what is the best mix to maximize what the clientB次元官网网址檚 objective is,B次元官网网址� Petrera said.
Automatic contributions toward a plan are a simple, effective way to build a nest egg.
B次元官网网址淲e think that if each pair can make 50 bucks a month (per person) of contributions, theyB次元官网网址檒l get $37,000 by the time their kids hit 18 and go to post-secondary school,B次元官网网址� Embark CEO Andrew Lo said.
He stressed that parents should educate themselves about education. One in three polled by the company did B次元官网网址渘ot know enough to even guessB次元官网网址� how much post-secondary schooling costs.
Erika Shaker, director of the national office of the Canadian Centre for Policy Alternatives, said costs are going up and everythingB次元官网网址檚 getting more expensive.
She pointed to a shift in education funding from Ottawa a couple decades ago that prompted most provinces to download more of the cost onto students or, in the case of Quebec, B次元官网网址渢wo-tieringB次元官网网址� the price between in-province and out-of-province pupils.
The labyrinth of funding programs and rules sometimes acts as more of a barrier than a relief, she added.
B次元官网网址淪tudent assistance programs are a patchwork, theyB次元官网网址檙e messy, theyB次元官网网址檙e opaque. TheyB次元官网网址檙e actually quite difficult to navigate and they can change midway through a degree,B次元官网网址� Shaker said.
B次元官网网址淲e have gone to a user-pay model that disproportionately impacts B次元官网网址� negatively B次元官网网址� students who have to borrow, unfortunately, to pay for post-secondary education.B次元官网网址�
Christopher Reynolds, The Canadian Press
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