Saving enough money to cover the ever-increasing cost of post-secondary education can seem daunting. Here are six ways to get you started. We’ll even tell you how to qualify for over $9,000 in free money!
Registered Education Savings Plan
A regulated savings plan, similar to an RRSP (the funds grow tax-free until withdrawn), the Registered Education Savings Plan (RESP) is a tax-savvy way to accumulate some much-needed savings for your child’s future.
Pro: Guaranteed savings for education
Con: Money is taxable when withdrawn
Canada Education Savings Grant
In conjunction with the RESP, the Canada Education Savings Grant (CESG) provides the opportunity for you to receive up to $7,200 from the Government of Canada to help pay for schooling.
How it works: The government adds money to your child’s RESP to help grow the fund. After high school graduation, the child is eligible to withdraw the cash to help pay for education programs.
Pro: Free money for education
Con: You have to have an RESP to get the grant
Canada Learning Bond
Another tie-in to the RESP, the Canada Learning Bond allows you to receive up to $2000, and that’s before you even put a single dollar in yourself. It includes a $500 lump sum deposit and an extra $100 annually until your child turns 15.
Pro: More free money
Con: Again, eligibility is RESP dependent
Tax-Free Savings Account
Without the restrictions of an RESP, a Tax-Free Savings Account (TFSA) can be a useful, easy first step. By opening up an account and depositing whatever you can afford, you can be well on the way with little effort.
Pro: Flexible and easy to set-up and money can be withdrawn without paying additional taxes
Con: You’ll have to rely on willpower not to dip into the funds for another reason
Trust Fund Baby
A trust is simply a contract, a legal agreement by which one person agrees to give money to another.
Pro: You can draw up strict rules surrounding the money, ensuring it will only be used for its intended purposes.
Con: More sophisticated than TFSA. Lawyer required to draw up an associated written agreement
When your child is older and stretching his or her wings with that babysitting job or paper route, let them contribute to their education fund. We all know that working for something helps to increase its overall value, so pass on that far-reaching life lesson to your child. They will feel more involved and responsible when they get there, knowing they helped pay for it.
Pro: Learning the value of a dollar is priceless
Whichever method you choose, sooner is better than later. With a four-year degree costing upwards of $50,000, putting aside even as little as $20 week can have a dramatic impact on the financial demands of post-secondary education.