Financing An Education

 How much will it cost parents to fund post-secondary education in future?

 It is estimated that the full cost of a 4-year undergraduate degree from a Canadian University in 2028 could be over $130,000.[i]  Universities and colleges are increasingly relying on tuition fees to fund their operations.  Between 1989 and 2009, tuition fees rose from 10% to 21% of their total revenues, while government funding fell from 72% to 55%.[ii]  Over a quarter of graduates who borrowed for their education owe $25,000 or more upon graduation.[iii]  The number of jobs requiring post-secondary education almost doubled between 1990 and 2007.  Only half as many jobs were available for those who had not completed high school.[iv] Finally, since 2010, a $28,000 loan paid back over ten years generally costs a student $43,000.[v]

The cost of education is, therefore, an expensive proposition for students and their families.  In light of this, the options today’s families have without a Registered Education Savings Plan include:

1. Borrow the money;

2. Withdraw funds from personal savings, or investments;

3. The student earns the money and depends on student loans; or

4. Any combination of the above.

However, a great alternative to these options is a…

Registered Education Savings Plan (RESP)

What is an RESP and why should you invest in one? 

An RESP is an education savings account registered with the Government of Canada.  Essentially, it helps you, your family and friends put aside money for your child’s education after high school.  Given the ever increasing cost of an education, it pays to save sooner rather than later and saving a dollar a day can make a difference.

Savings under an RESP are eligible for the Canada Education Savings Grant (CESG), the Canada Learning Bond (CLB), as well as Provincial Incentive Programs.  There are also tax benefits in that investment income on contributions of up to $ 50,000 are tax-sheltered.

What is the CSG?

No matter how much money your family makes, the Basic Canada Education Savings Grant will give you 20% on every dollar of the first $2500 you save in your child’s RESP each year.

What is the CLB?

The Canada Learning Bond is $500 offered by the Government of Canada to help you to start saving now for your child’s education after high school. Plus, your child could get $ 100 every year until he or she turns 15 years old to a maximum of $2000.

If you envision your child continuing their education after high school, you should give investment in an RESP serious consideration.   To receive more information regarding RESP’s, other financial planning initiatives or a no obligation consultation, please contact Charlotte Campion at 416-206-9167, send an email to:  [email protected] or visit www.heritageresp.com/CharlotteCampion.

***

Charlotte Campion has been a consultant in the financial services sector for over 15 years.  She is a graduate of Ryerson University in Business Administration, a member of the RESP Dealers Association and is licensed with the Financial Services Commission.  She has been advising clients on different financial planning topics and conducted a variety of information seminars for individuals and business owners on estate planning, insurance and investments.