One of the many stresses that parents have on their plates is worrying about how they will manage to pay for their child’s or their children’s education. Having kids can be pricey but it’s important that if you choose the responsibility you need to save, save, save for them too. With the rising costs of college and university tuition, in addition to the current job market challenges, finding the money to pay for one child’s education, not to mention families who have to pay for multiple children can be quite a serious predicament. Finding ways to save will also help you teach your kids how to manage their money better.
As I have already said many times in my previous posts, our children are still small. However, I will admit that we have already become plagued by thoughts about their future education. I guess when you think about it, it is never really too early to plan for these future expenses and as a result this is a topic of interest to my family at this current time – as I am sure it is for many other parents.
To help offset these costs and to improve your level of stress – here are some ways you can save for your child’s education – whether you are starting now or planning in advance.
5 Ways to Save for your Child’s Education
1) Registered Education Saving Plans (RESP)
While you may already be aware that these plans exist, I want to start off with this point and mention some of the features of this savings plan. This plan has been around since 1998 and is likely one of the most popular methods that parents choose to help save for their kid’s education. The money that is deposited into these accounts is tax-free and through the Canada Education Savings Grant (CESG), the Government of Canada provides a 20% grant based on RESP contributions, totaling $2,500 per year and up to 17 years. With this method, parents are encouraged to start saving as soon as possible in order to take full advantage of the potential for investment growth.
2) Tax Free Savings Account (TFSA)
Another method of saving for your child or children’s education is to open a tax free savings account. Many banks will offer these types of accounts and any additional money that you can spare each month can be deposited. An automatic deposit can be set up from one of your other accounts and sent directly into the TFSA. While parents can have this account set up in their name, children who are aged 18 years and up can contribute to a TFSA of their own. The funds in these accounts are also able to see growth that is tax-free and any withdrawals which are made are also tax-free.
3) Canada Learning Bonds (CLB)
In some cases, your child may also be eligible to receive a Canada Learning Bond of $500 in the first year and $100 per year for the 15 years that follow. If you have any children who were born any time in 2004 or after and you also currently receive the National Child Benefit Supplement to the Canada Child Tax Benefit, then it is likely that you can take advantage of the Child Learning Bond. This bond can be contributed directly to an open RESP account without additional RESP contributions being required. The typical income level baseline of approximately $38,000 or less as well, can deem families eligible for the CLB.
4) Contributions by your Children
Lastly, it doesn’t just need to be you that is making all of these contributions. You can keep your child involved in their education savings plan and encourage them to find ways to earn some extra money over time. After-school, weekend and summer jobs are all effective methods of earning money for their future as well as teaching them how to be financially responsible.
Together you can also seek out scholarships and bursaries which can help cut down on some of the tuition demands. This of course can come a bit later, when perhaps they already have an idea of what type of career or educational path they will take. One extra benefit of obtaining a scholarship or bursary is that many post-secondary institutions offer these funds without having to be taxed.
While some of this information you may already be aware of there may be some ideas that are new methods of saving for your child’s education that you may choose to look into further. Every little bit helps and if you can save even part of the money then you are in a better position than you would be otherwise. One thing that was new to me or at the very least has shown me how to approach this type of saving, is the idea that your children can be active participants in this process. Working together to save the necessary income will go along way to making their future dreams a reality.