How to plan & save for your child’s education, even if their plans change

How can you tell if your baby will want to become a doctor, a teacher, a plumber, a chef or something else? You can’t—and that’s why its best when parents start saving for their child’s education as soon as possible to give their child the option to choose their career.

What will your child’s education cost?

One of the biggest concerns most students and parents face is the cost of education programs. Tuition costs vary widely by school and by discipline. For example, in 2014–15, average undergraduate tuition fees across Canada were:

  • $4,510 for education
  • $7,151 for engineering
  • $10,508 for law
  • $11,173 for pharmacy
  • $12,959 for medicine
  • $18,187 for dentistry

Three strategies to help build flexibility into your education savings plan.

1. RESPs and more

Registered Education Savings Plans (RESPs) have compelling benefits:

  • Canada Education Savings Grants (CESGs) boost your annual contributions by 20%, up to a maximum grant of $500 per year and $7,200 per beneficiary
  • Your investments grow with taxes deferred until your child starts withdrawing money to pay for post-secondary education

However, RESPs have a lifetime contribution limit of $50,000 and the CESGs and investment growth must generally be used to pay for qualifying educational programs. 

Consider investing additional education savings in two accounts with fewer restrictions:

  • A Tax-Free Savings Account (TFSA) allows you to contribute up to $5,500 a year, get tax-free investment growth and withdraw your money for any purpose 
  • A non-registered (open) account allows you to contribute as much as you want and withdraw your money for any purpose 

2. Adjust your plan

Reassess your savings strategy as your child becomes a teenager and starts to narrow down career options. If it looks like your child

  • will pursue an expensive degree consider doubling down on RESP savings while you can still take advantage of CESGs 
  • may not attend college or university emphasize TFSAs and non-registered savings 

3. Access more money

You don’t have to do all of this on your own. In many cases, you and your child can access additional cash flow from:

  • Grants, bursaries and scholarships
  • Summer jobs and part-time work for students
  • Student loans and lines of credit

As you talk and plan with your child on their future, consult an advisor who can recommend additional strategies to maximize your education savings, build flexibility into your plan and allow your child to fulfill his or her career dreams.

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