When it comes to funding your children’s post-secondary education, not everyone needs to start socking away $200 a month into an RESP as soon as their baby arrives home from the hospital. And while I like that option if the parents are forward-thinking and can find that space in their budget, there are other sources of funds to consider.
It’s never a good idea to plan on or expect scholarships, bursaries or grants, but the fact is there are more than ever available. Grade 12 students who are willing to take the time to complete applications are often surprised to find that millions of dollars of awards go unused each year, simply because no one applies. And it’s not just marks that matter. Excellence in sports, volunteerism, and combinations of skills/experience/entrepreneurship are just as often rewarded as much as average grade. Each post-secondary school has their own list of awards, and local groups (eg. Rotary Club, Chamber of Commerce) often have their own scholarships available for accomplished young people.
Government benefits can also be used to help fund your children’s education. The Universal Child Care Benefit (UCCB) is paid out to all families with children under 6 years old as a taxable $100 per child per month. The Canada Child Tax Benefit (CCTB) pays out $120 per child per month for each child under 18. Reductions to the CCTB are made on a sliding scale if family income is higher than $44,000 (dropping to $0 at about $115,000 family income). These cheques are provided to help offset the expenses of raising a child, which could include saving it for their future education.
Birthday gifts, Grandparent gifts, cash awards, part-time work and inherited money can also add up over the years so always consider the long-term benefits of saving a portion of these funds to help with post-secondary education.
Of course, I love the RESP – the Registered Education Savings Plan. Any time the government is willing to top-up your contributions by 20% (with the CESG), that’s free money! There aren’t too many restrictions if you set up an individual plan or family plan at your local credit union or bank. And any of the above sources of funds can be contributed to the RESP. There are no annual limits to RESP contributions, however you will never qualify for more than $500 from the government top-up each year (the Canada Education Savings Grant), and $1,000 when carry-over room from prior years is being used. The lifetime contribution maximum is $50,000, and the CESG lifetime limit is $7,200 per child.
Post-secondary school is getting more expensive every year. As an example, currently a 4-year Humanities degree at McMaster University will run about $20,000 per year (all-in). While it makes sense for parents to offset some of this cost, a surprisingly large number of parents never get around to it. Most importantly: start. Even $100 a month will add up, and yes, this is something your child will thank you for – maybe even before the mortar board lands at graduation.