Planning for Their Post-Secondary Education? Our Advice for a Financially Mapped-Out Future
February 10, 2021
When starting to financially map out your child’s potential post-secondary education, there’s no such thing as “too early” or even “too little.” According to the latest 2019-20 figures from Universities Canada, the average tuition fee for a Canadian resident studying for a 3-year humanities or arts degree at Bishop’s University, Quebec can cost between $2,544 and $7,940. And that’s minus living expenses which can reach close to $20,000 per annum for students who live away from home. That’s a lot of money to put aside before college starts.
Encouraging children to pursue a post-secondary education comes at a cost. And when there’s more than one child likely to pursue an education, even higher-income families would be wise to think ahead as to how they will finance this. This is where the registered education savings plan (RESP) comes into play.
If your children are barely out of kindergarten right now, or more worried about mastering long division than completing a master’s, you may want to take advantage of insight into the cost of post-secondary education, where savings can potentially be made and how you can get more out of your savings by planning ahead.
What an RESP Can Do for Your Family
As industry pioneers in education savings, at Kaleido, we want to encourage as many people as possible to open an RESP so young people can access the education they deserve.
Across Quebec and New Brunswick, we offer families 2 types of investment plans. Subscribers can choose how long they want to save: 2 years, 5 years, 10 years—up to 17 years for the REFLEX Plan—, and at a pace that works for them. The alternative is the INDIVIDUAL Plan where you can set the pace of investment and you can also withdraw funds before the plan matures1. If you have a Social Insurance Number (SIN) and proof of residency, you’re all set! By starting to contribute early on, you’ll get a pleasant surprise when you’ll realize how quickly the funds add up, rather than the sharp sting of an unexpected college or trade school fee.
While your younger kids might not share your enthusiasm and prefer cash or a toy for a birthday present, a further advantage of the RESP is that family members and friends can chip in as a gift that will be very useful once your child begins university, college or trade school.
It’s also worth pointing out that the RESP is different from other savings accounts you may have read about when looking into education planning, as the government matches a percentage of the subscriber’s contributions, depending on family income.
Plus, with an RESP, your contributions grow tax-free and the Educational Assistance Payments (EAPs) are taxed in the beneficiary’s hands rather than the subscriber’s.
Kaleido also offers an exclusive advantage to its clients: the Stepping Stone Program2, which gives access to family coaching from a professional team. This additional service provides families with helpful support as their children grow into young adults and start to make their own choices regarding their education.
With any RESP there are of course limitations and considerations along the way, regardless of the provider you choose to go with. RESPs have a contribution limit of $50,000, but within that, depending on the type of plan you choose, you have different contribution options. For instance, with an individual plan, . And whoever you invest with, make sure there’s an experienced team to support you at every step as you’re planning for your child’s education.
And we haven’t quite finished with the good news yet! If you’re a resident of Quebec, you could be eligible for the Quebec Education Savings Incentive (QESI). Canadian residents could also receive the following grants:
- Canada Education Savings Grant (CESG): Available to any Canadian resident with a Social Insurance Number (SIN)
- Canada Learning Bond (CLB): For low- and middle-income families, qualification guarantees $500 at plan opening plus an annual $100 into your RESP until your child turns 15, based on adjusted family net income.
Let’s take a look at what this means in terms of actual savings.
Right now, each Quebec RESP beneficiary could receive up to $12,800 in matching grants3. For students who remain living at the family home, that could likely cover the entire tuition fee.
You might be thinking this is great, but that your children are still many years away from starting their post-secondary education and circumstances change. That’s why you’ll want to go with an RESP that fits your own situation and needs. Maybe your 10-year-old who’s been dreaming of a career in law will decide at 18 to move abroad and start a pet sanctuary instead of pursuing a post-secondary education. Or perhaps you daughter who’s never been interested in school will end up wanting to become an architect, which involves 5 to 7 years of education.
No matter what educational path your child chooses, Kaleido can offer you advice and solutions. Read more about our RESPs and discover how you can get your investment back or even transferred to another child. We can also advise you on how to manage your contributions if money gets tight.
There’s More Than One Way to Save for School
If you’re not ready for an RESP or maybe you feel your family doesn’t qualify, it might still be a good idea to put some savings aside as a contingency plan for the kids. This may not be in an official “college pot” or specific savings account, but having funds that are ring-fenced for your children’s future not only means they are protected but it instills in them the knowledge that money can’t necessarily be accessed when they feel like it. One of the most popular methods is a tax-free savings account.
The College Years—Living at Home or Away
When you take out an RESP or open another type of savings account, as a family, you’re probably a long way off from talking about whether they’ll be living on campus or at home. While a big portion of parents and children are keen to pursue the independence of studying away from home, the costs—especially over several years—can be prohibitive. It’s not just paying for rent, food and books, but also transport: if they’re off to another province, the potential expense of flights alone over a number of years could quickly accumulate. To help you make a decision, there are a number of websites that provide the most recent figures on living expenses at different universities.
The decision to live at home may not be an easy one for a young person determined to spread their wings. It’s not just the appeal of moving away and managing on their own that leads them to choose a school far away: it might be the only place where their program is offered. If you don’t have the financial wherewithal to support a big move, this could limit the eventual career choices and opportunities of your child. Thankfully, if you’ve opened an RESP, part of that financial burden could be covered.
In addition to the RESP and grants, your child can of course apply for scholarships and bursaries. These are often specific to a province, educational program or institution, and RESP beneficiaries can also take advantage of a scholarship to help pay for school if they fit the criteria and have the prerequisites.
It’s also worth looking at some of the more niche opportunities. With a current emphasis on getting more women into a career in science, there are a number of opportunities specifically for female Canadians via brands and organizations. Note that these change regularly and vary in terms of value, so you might want to do some research.
There are also scholarships that are designed for students who can prove a certain level of financial need, while there are some instant “wins” of smaller amounts decided by prize draws. You can explore local and countrywide options as well as anything that ties in with the achievements of your child as the rewards can be significant. However, some of the qualifying rounds can be both rigorous and challenging.
Approaching the College Years (And Staying in the Black)
Before you know it, that toddler with the grazed knee and a rudimentary knowledge of words and numbers is packing his cases (or book bag if he lives under your roof) and heading off to pursue a degree or vocational course.
If you have an RESP, those funds can now be withdrawn and used in the way it was intended. Your children may have been prudent enough to have savings from weekend or holiday jobs as well, or perhaps they intend to supplement any grants with a part-time job while studying.
Even with the safety net of the RESP, a scholarship, or help from mom and dad, it’s all too easy for students to find themselves in debt and taking out loans that take years to pay off. That’s why it’s a good idea to equip your children with financial planning knowledge and tips on saving while studying.
Soon enough, it will be them worrying about their kids’ post-secondary education and how it will be paid for. Feel confident that you’ll have prepared as well as possible for your children’s school years and passed on your best financial tips.
Discover how we can help you save for your child’s post-secondary education by making an appointment with one of our seasoned scholarship plan representatives.
1. Certain conditions apply. Refer to the prospectus.
2. Certain conditions apply.
3. Canada Education Savings Grant (CESG) of 20% to 40% and Quebec Education Savings Incentive (QESI) of 10% to 20%, based on adjusted family net income. The annual CESG limit is set at $600 and the lifetime limit is set at $7,200 per child. The annual QESI limit is set at $300 and the lifetime limit is set at $3,600 per child. Canada Learning Bond (CLB) of up to $2,000 per beneficiary, for children born after December 31, 2003, from families who meet the financial criteria established by the federal government. Certain conditions apply. Refer to the prospectus.