Christopher Loy CPA, CA
Senior Portfolio Manager & Senior Investment Advisor
BMO Nesbitt Burns
1 First Canadian Place
39th Floor, P.O. Box 150
Registered Education Savings Plan
In our ever-changing world, a post-secondary education is your child’s best defence against an uncertain future. While a post-secondary education is a valuable personal asset, it is expensive to acquire.
How expensive? Education costs will vary considerably depending on factors such as where your child will live, the university chosen, the degree sought and the program (e.g. medicine) selected.
A recent BMO Nesbitt Burns survey showed that the average cost of tuition, room and board for a full-time student is approximately $10,500 per year. Transportation and the cost of books increase the price even further. Since 1987, education costs have been rising by almost five per cent annually while the overall inflation rate has averaged only three per cent. If these trends continue, a newborn’s four-year university degree could easily exceed $75,000 assuming a three per cent inflation rate and over $100,000 if education costs continue to rise at five per cent annually – and you can double that amount if you’re considering a school in the U.S.
As the cost of a post-secondary education steadily increases, many parents are looking for ways to fund their children's future education needs. Fortunately, with a comprehensive education plan and an early start, a university education can be a reality for your children. Using our sophisticated planning software I can create a customized education analysis that will help you estimate the future costs of your child’s post-secondary education. Once the education funding goal has been quantified, I will work with you to develop a plan to reach your education goals.
An RESP is a tax-deferral plan designed to help parents, grandparents and anyone interested in saving for a child's education. While RESP contributions are not tax deductible, the income earned on contributions held inside the plan compounds on a tax-deferred basis. The lifetime contribution limit per beneficiary is $50,000. The CESG will only be paid on the first $2,500 of contributions per beneficiary per calendar year. The lifetime CESG limit per beneficiary is $7,200. While a child may be the beneficiary of more than one RESP, all contributions made to the respective plans cannot exceed the stated maximums. When the income and CESGs are eventually withdrawn from the RESP to pay for education-related costs such as tuition, books, travel and accommodation, they are
taxed in the hands of the beneficiary (the student), not the subscriber (contributor) and should attract little or no tax if withdrawn over a number of years.
As we enter the 21st century, it’s clear a post-secondary education will be required if your child wants to find a fulfilling and rewarding career. With the need to meet these future expenditures, it’s easy to see why saving for a child’s post-secondary schooling is a major financial objective for most parents.
At BMO Nesbitt Burns, our experience has shown that a dedicated savings strategy, that includes a Registered Education Savings Plan (RESP), has proven to offer the greatest assurance that the money will be there when it's needed.
For more information, please contact me.