Tuesday, September 24, 2013

Saving for Your Child's Education

Me at high school grad with my dad and my sister
Growing up, I always knew I would go to university. My parents expected it of me and I came to expect it of myself. I was also fortunate that my parents were willing to pay for my education. 

I'm not sure how they did it, but they paid for all of the expenses associated with my first year away at Wilfred Laurier University in Waterloo - residence, books, meal plan, tuition. Their costs went down some in my second to fourth years when I decided to return to Hamilton to attend McMaster University. I only began paying for my own studies when I started my Masters program at Western.

All of this is to say that it's important to my husband and I that our children pursue post-secondary studies. The strange thing is, although we started saving money for their education when they were small, we never developed a proper savings strategy until just this year. Generally I'm responsible for the finances in our house and somehow I had a mental barrier when it came to actually getting down to the business of starting a registered education savings plan (RESP).

I finally made an appointment with an advisor at RBC recently. I was a bit sheepish, having waited so long to contribute, but Sophia was friendly and helpful and she reassured me that I'm not the first person to have waited this long. I told her that my husband and I are not big risk-takers and she suggested some lower-risk mutual funds. We also elected to put some of the cash in GICs.



Get Your Free Money!


No matter what you choose to put into your child's education plan, one of the main benefits of contributing is the government grant. The Canada Education Savings Grant matches up to 20% of the first $2,500 contributed annually per child. That could mean up to $500 a year, with a lifetime maximum of $7,200. That's free money.

If you come to the table late, like us, you can still access the government savings grant by contributing the funds retroactively, two years at a time. That means you can contribute $5,000 per child in one year - $2,500 for the current year and $2,500 for the last year you didn't contribute previously.



My McMaster University grad pic

Save Early & Regularly


Of course, coming up with $5,000 in one year isn't easy for most of us. The better idea is to save early and regularly. Especially when the kids are small, because all that money they get from grandparents and relatives can go right into RESPs. That becomes more difficult later when they want to spend that money on video games!

A family RESP means if one child doesn't use the funds the other can. And the money isn't just for university - it can be accessed for college, apprenticeship and non-credit courses. If your child doesn't use the funds, you can use your contributions and earnings to fund your RRSP.

With Sophia's advice, the savings process was so easy that I wonder just why we waited so long. All I needed to bring to our meeting was the children's social insurance numbers and my cheque book. Next up for us is meeting with Sophia again in December to discuss making monthly contributions with RESP-matic. Even if we can contribute $50 a month per child, it will make a big difference in the long run. 

Get advice about saving for your child's future here. Find answers to your questions about RESPs here.

Have you started saving for your child's education?



Disclosure: I am part of the RBC RESP blogger program with Mom Central Canada and I receive special perks as part of my affiliation with this group. The opinions on this blog are my own.  #SaveWithRBC


14 comments:

  1. I have begun to think of this, for when I have children someday. I wish we could provide all children with a college education. I know that may be naive of me but I just think the world would be a better place and would have more open minds :)

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    1. Good for you for thinking ahead!

      I don't think you are naive. All children should have a college education. In privileged countries like ours, kids should have access to quality education (as they should everywhere, but you know what I mean!)

      Jo

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  2. We should all have access to full education!

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    1. Wouldn't it be nice if a good education wasn't expensive.

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  3. What a great affiliate post Jo! ;)

    I was one of 6 kids to a widowed mom I never expected any money for school and therefore choose collage instead for that reason mainly (at the time) (I went to Sheridan which I was very happy with) but now that I'm a mom this comes up here and there and I would never want my kid to be left out with all the bills...
    the program sounds great and I'll run it by the other half ;)
    xox

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    1. Thank you Miss Ella!

      Wow. What your mom must have gone through. Makes my challenges with saving for two look pretty easy.

      Sheridan is a great school. I applied there for a writing program but didn't end up going.

      You should definitely mention this to the other half. Freeeeee Money!

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  4. You had me at 'free money', though I live in the wrong country for that unfortunately! We were given money for my son when he was born, then all birthday/Christmas money went in to his savings account when he was little. Of course now he spends (or saves up) money he gets and nags us now and then about 'his' money in his bank account and how he wants to withdraw it and spend it...

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    1. I opened bank accounts for the kids while I was at RBC too. So far they are empty. ;)

      But I am asking them to consider contributing a portion of their gifts to the account in future. :) It's hard because they do indeed nag for stuff all the time!

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  5. I was lucky like you and had parents who were generous enough to pay for my education. I hope we can do the same with our littles, and we are trying to save for that.

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    1. It's great when parents can provide that to their children. Good for you for starting early Ruthie. :)

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  6. The cost of college is so daunting. I'm still paying off my own loans from graduate school, luckily I decided to go to state school where I had a full scholarship as an undergrad or I'd have double those loans-yikes!

    We're trying to think about it all now too, but those projected tuitions are really overwhelming.

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    1. That's wonderful that you got a full scholarship! But hard paying loans when you have a family, right?

      I can imagine what your projected tuitions are like. Ours are high enough and I think the US is probably worse.

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  7. We signed both of our kids up for the CST Education Plan when they were still babies, it seemed then that secondary education was a long way off but the years went by so fast! These funds sure came in handy! Carla had a major windfall when she was in high school, she sold a very rare Beanie Baby, she paid for her first year with the proceeds!

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    1. That is incredible! What an amazing thing, to sell a find for that much money. Makes me want to go to the thrift store...

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