Saving For Post Secondary Costs
The Learning Experience – For The Kids In Your Life. And You.
Higher education is something almost every parent wants for their child and with good reason. A Statistics Canada study indicates that 65 percent of all new jobs require some postsecondary education. In the first half of the nineties, available employment for students with less than a high school diploma dropped a full 30 percent, while the number of jobs for university grads (which pay 45 percent more, on average) jumped by 20 percent.
Unfortunately, the way things are going, more than a few families aren't going to be able to afford it. And many of those that can are going to be stretched. While this is far from a happy situation, the impact of missing a higher education can last a lifetime.
That is, unless parents, grandparents, or friends take constructive action. Thankfully, with a comprehensive education plan and an early start, inadequate finances don't need to make high school the end of the line for the kids you care about.
The actual cost varies with the university chosen, the degree sought and the discipline selected. The cost of post-secondary education in Canada is already high and growing at a rapid rate. Cost for tuition, room and board for a full-time undergraduate university student currently averages about $12,000 per year. Travelling costs and books are extra. A four-year degree exceeds $50,000. As more and more students are pursuing post-graduate studies, the total cost of a university education is increasing.
What's more, these figures make no allowance for escalation. With ongoing government cutbacks in educational funding, escalation of higher learning costs is almost certain to eclipse inflation for the foreseeable future.
There are many ways to fund a higher education. What's right for your situation depends on many factors, including your net worth, the ages and number of children involved, and whether or not you want to surrender the right to take back the principal you have contributed.
You can, for example, hope that your child wins a scholarship - or is able to earn significant amounts through summer and part-time jobs. You can postpone the issue, in the expectation of writing a cheque or taking out a loan on the day of enrolment. You can set money aside in a savings or investment account. Or you can begin investing as part of a formalized education plan. Your chosen strategy can include a Registered Education Savings Plan (RESP), which shelters from tax the income on your investments - and provides access to direct contributions from the federal government through the Canada Education Savings Grant (CESG). Alternatively, you can decide to establish a formal trust which may offer greater flexibility in some areas.
The choice is yours. However, we do suggest that you think about planning sooner rather than later and about taking advantage of whatever help is available to increase both the funds that will be available and the rate at which they accumulate. From our experience, a dedicated education savings strategy has proven to offer the greatest assurance that the money will be there when it's needed.
Sorting It All Out
So where will the money come from to pay for your child's higher education? By preparing an education analysis, your BMO Nesbitt Burns Investment Advisor will help you determine costs and the best way to save for them.
An education analysis assesses a number of factors, including the number of children under consideration and their ages, the number of years of post-secondary education you anticipate for each, your existing savings and ability to save, and a possible rate of return for the level of risk you can comfortably accept. It will also assist your Investment Advisor in reviewing the suitability of various planning vehicles – from RESPs to trusts - and the types of investments you can hold within them, from GICs to mutual funds to stocks and bonds.
Based on our assessment and recommendations we will help you with the initial implementation and ongoing monitoring of your education plan.
At BMO Nesbitt Burns, we specialize in all aspects of assisting Canadians to provide for the higher education of a child or children.
From identifying the problem areas, to seizing the right opportunities, we can help at every stage.
Like most relationships, ours will start with a simple conversation during which we will jointly assess your particular needs and you can personally confirm the depth of our resources.
Talk to your BMO Nesbitt Burns Investment Advisor to learn more.