As parents, we all want to provide our children with the best possible future, and a big part of that is making sure we’ve saved enough for their higher education. As the costs of tuition continue to rise, it’s more important than ever to start saving early.
The first step is to get a clear picture of the potential costs. Tuition fees vary widely depending on the institution and program of study. You'll also need to account for additional expenses like books, supplies, accommodation, and living expenses. The earlier you start saving, the more you can leverage the power of compounding interest. Even small, regular contributions to a savings plan can grow significantly over time, reducing the financial burden when it's time for your child to head to college. In Canada, one of the most effective tools for saving for education is the Registered Education Savings Plan (RESP). Contributions to an RESP grow tax-free until they are withdrawn. When the funds are used for educational purposes, they are taxed in the student's hands, typically resulting in little to no tax due to their lower income level. Additionally, the Canadian government offers the Canada Education Savings Grant (CESG), which matches 20% of the first $2,500 contributed annually to an RESP, up to a maximum of $500 per year, with a lifetime limit of $7,200 per child. While not specifically designed for education savings, a Tax-Free Savings Account (TFSA) is another great tool that can be used to save for your child's education. Contributions are not tax-deductible, but the income earned within a TFSA is not taxed, even when withdrawn. When your child reaches high school, begin researching scholarships, grants and bursaries. These can significantly reduce the financial load of post-secondary education. Many private institutions offer awards based on various criteria, including academic achievement, community involvement, and specific talents or interests. For many families that I’ve worked with, they’ve gotten a lot out of involving their children in the savings process. This teaches them valuable lessons about money management and the importance of investing in their future. Whether it's through part-time jobs, saving gifts from relatives, or understanding the family's financial planning, their active participation can make the journey more meaningful. Every family's financial situation is unique, and what works for one may not be the best option for another. Consider consulting with a financial advisor to create a personalized education savings plan that aligns with your financial goals and circumstances. Remember, the path to saving for your child's education is a marathon, not a sprint. With careful planning, consistent saving, and the right financial tools, you can build a solid foundation for your child's future. CG WEALTH MANAGEMENT IS A DIVISION OF CANACCORD GENUITY CORP., MEMBER-CANADIAN INVESTOR PROTECTION FUND AND THE INVESTMENT INDUSTRY REGULATORY ORGANIZATION OF CANADA The comments and opinions expressed in this article are solely the work of Clinton Orr, not an official publication of CG Corp., and may differ from the opinion of CG Corp’s. Research Department. Accordingly, they should not be considered as representative of CG Corp’s. beliefs, opinions or recommendations. All information is given as of the date appearing in this article, is for general information only, does not constitute legal or tax advice, and the author Clinton Orr does not assume any obligation to update it or to advise on further developments related. All information included herein has been compiled from sources believed to be reliable, but its accuracy and completeness is not guaranteed, nor in providing it do the author or CG Corp. assume any liability. Tax & Estate advice offered through CG Wealth & Estate Planning Comments are closed.
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AuthorClinton Orr is a Senior Wealth Advisor and Senior Portfolio Manager with Canaccord Genuity Corp. Archives
July 2023
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