In the first post of the Heritage Funds RESP Savings Tips series, I discussed the staggering costs that we are dealing with as our eldest child entered the University of Ottawa this fall. It was both cathartic and frightening to put pen to paper and numbers to calculations. In our daughter’s quest for post-secondary education, we included the pre-selection trips to university campuses in Ontario. They included visits to the University of Ottawa, University of Toronto, Queen’s University and Western University. There is no small number of post-secondary institutions that you can attend in Ontario this is why we choose to stay within our home province. Though we had considered McGill University and the University of British Columbia (both of our Alma Maters) as part of the mix, in the long run, we felt that having her in Ontario was the best option for our family.
As we roll out the costs, we know we have another child entering university in three years and our last child two years after that. The expenses in the next few years will be substantial and we need to make plans for their success. This task needs to be a process that involves all of us in one form or another all the while, considering changes to our lifestyle as well as putting together some sort of savings plan. For us, it may mean local vacations, fewer conferences, picking up more blogging assignments and working longer hours. It also means the girls will be looking for full-time summer and part-time after school jobs to help with the costs.
7 ways to save for your child’s post-secondary education without incurring more debt:
1. Start early.
I cannot stress enough how important it is to save for your child’s education from the get-go. It takes 18 years for them to get to university that is a long time to save even if it’s just a little bit every month. Starting when they’re young lets your money grow. It’s called compound interest and if you read The Wealthy Barber in the 1990s you know that the formula is simple: save early and your money will grow and grow and grow. I am not a financial advisor, so please take that into account, but there are people that can help you understand how all of this works. Speaking to an RESP specialist will help you understand your options.
2. Pick up more work.
This is the one lesson I’ve learned from watching those budgeting, debt-free, “how not to be a princess” reality TV shows – pick up more work. I know this may sound like the wrong place to get financial advice (on TV), but sometimes the best advice is the easiest to incorporate. For me, this means that I have to pick up more blogging assignments and apply for more opportunities to increase my income. Having the ability to pick up extra income will help with the bills.
3. Get your kids working.
Since my daughters were young teens, they have babysat after school for a neighbour. They have also taken on house-sitting, tutoring, teaching swimming lessons and odd jobs. This is not a lot of income but it teaches your children the value of earning money and putting that money towards a greater goal. When our oldest wanted to go to Ecuador on a trip for Me to We she knew she had to come up with half the money to make it a reality. She also saved all her babysitting money, any money that she received for Christmas, birthdays and special occasions. She has recently picked up a part-time job helping bloggers as a virtual assistant. So on days when she’s not too busy at school, she works from home for a few hours a day. This compromise helps her make some money without having to carry a 10-15 hour part-time job in a retail.
4. Cut back.
To say the least, this exercise in financial awareness for post-secondary education has meant that there is greater awareness of where the money is going. Last year it went into the task of finding the right school. Over the summer it meant I had to make some hard choices to forgo conferences in San Diego and Calgary. Both of these conferences were work-related but I knew the airfare, accommodations, meals, conference fees and transportation expenses were too much. I sought out different blogging conferences within driving distance.
Cutting back at home also meant taking shorter vacations, closer to home. This summer, we went to incorporated soccer tournaments and added a few days in Montreal and Quebec City and ruled out any trips that would involve airfare and extended hotel stays. I have tried to incorporate blog work so we can write off some of the expenses. We’re definitely making Christmas a much smaller affair this year. We tend to be generous with our children but we need to teach them there are times when we need to cut back on expenses.
5. Research Scholarships and Bursaries
According to ScholarshipsCanada.com, there are 80,340 awards totalling $174,909,983 in available funds for education. Applying for scholarships and bursaries was one of the options I had my daughter look into as early as Grade 11. Why this early? In order to win a scholarship, there may be criteria that have to be met to even be considered. You may have to have a certain number of community service hours or you or a family member may have to be a member in good standing with a particular organization. It may be a private scholarship, but applicable in only one institution. Maybe it’s a corporate scholarship and there is an essay that must be written or a few letters of recommendations that need to be acquired. Many of these scholarships are only offered once a year or may only be for first-year students, students studying STEM studies, grad students, students with disabilities, or bilingual students. There are thousands of scholarships available and searching them out can be a full-time job,regardless, every little bit counts.
At the University of Ottawa, my daughter received a bursary because she decided to pursue a bilingual degree. Her university wants to encourage linguistic diversity so the incentive is there to take courses in French. This was one of the major factors in our decision to send her to the University of Ottawa. Many, many universities offer entrance scholarships to their students if they have an 80, 85, 90 or 95% average. Most work on a scale so that the higher the overall average, the larger the scholarship.
6. Invest in an RESP
One of the best ways to save for a child’s college or university fund is through a Registered Education Savings Plan (RESP). A RESP can help because there are a variety of options offering flexibility, tax deductions and tax-deferral. The basic way a RESP benefits a family is that any income earned inside an RESP is tax-sheltered, and when the tax does become payable, it is taxed at the student’s tax rate, not the parent’s. Since students don’t usually make a lot of money, that means very little to no tax is paid. The key is to access the Canada Education Savings Grant (CESG) that matches your contribution (to a limit of $7,200) by the Government of Canada. This was an eye-opener for me when I realized there were tax advantages and assistance available both from the university and from our government.
7. Find Government Incentives
Once you’ve set up your RESP you can then take advantage of other government incentives. For example, the Canada Education Savings Grant (CESG) equals 20% on the first $2,500 of your annual contribution, to a maximum of $500 a year (up to $7,200) for a child under 18. Each province may have individual education savings plan. Depending on what province you reside in, you can also look into the Alberta Centennial Education Savings (ACES) Plan (up to $800), the Quebec Education Saving Incentive (QESI) (up to $3,600), the Saskatchewan Advantage Grant for Education Savings (SAGES) (up to $4,500) and (coming in 2015) the British Columbia Training and Education Savings Grant (BCTESP) (up to $1,200). Some children will also eligible for a $500 Canada Learning Bond (CLB), with an additional $100 a year up until the age of 15. All these programs are subject to eligibility and may have age restrictions but it’s a good idea to look into them because essentially it is ‘free money’ to help you get your child a post-secondary education.
I realize that this process can be a bit overwhelming but if you make an appointment with a financial advisor or a financial products sales representative, you may find it is easier than you think.
Looking into RESPs, government grants and loans are some of the best ways to finance your child’s post-secondary school education. Going to university is not cheap and it’s also not for the faint of heart (you can read all about the cost in my first post), but it can be done if you take steps to work hard, save and take advantage of university scholarships, government incentives, and tax breaks. Looking into an RESP and the accompanying federal and provincial grants may make the financial blow just a little bit easier to take.
We look forward to watching our children grow and develop and take on the challenges that the world has for them. By helping them acquire knowledge through higher education, we would like to think we’re helping them on their way to becoming responsible adults and tax paying citizens. We also want to think we can change their bedrooms into yoga retreats or home theatres once they’re gone. A parent can dream, can’t they?
I know you will be trying to save a little so I wanted to share my good fortune with you. For keeping to the task of saving for your child’s post-secondary education DownshiftingPRO will give one reader a $25 TARGET Gift Card. (Open to Canadian residents only – excluding Quebec). See full giveaway details below*
Just enter below!
Read more in this series on Budgeting and Post Secondary Education –
- Three New Year’s Resolutions – Financial Planning with an RESP
- 10 Unexpected Items You’ll Pay for in University or College
*Please note carefully: This giveaway is open to Canadian Residents (excluding Quebec) 18+ from Dec. 21 2014 to January 21, 2015. Entrants will need to supply a valid name (no nicknames or on-line name), IP address and email address for verification. They will have 48 hours to respond to the email as well as answer a skill testing question. If you do not contact me within this time another winner will be chosen. Please check your spam file.
Good luck to all that entered. Many thanks to Heritage Education Funds for sponsoring the Giveaway!
Disclosure: I have been compensated for the series of blog posts but all opinions are my own.