As a parent, you likely have a never-ending list of things you need to do before your child heads off to college. You’ll want to help instill diligent work habits and some basic skills for living away from home. You’ll try to teach some basic financial responsibility, and go over some important health and safety advice (including the sex talk, updated for college). And, of course, you’ll always be adding new thoughts and ideas based on your child specifically, as well as where he or she is attending college.
Alongside all of these concerns however, you may also be making an effort to fund your child’s education. By and large, tuition at top Canadian universities is relatively low for domestic students is relatively low compared to in some other countries (or to what international students pay). However, saving for college is a significant endeavor for most families and thus a crucial part of the college prep process to take seriously.
So how exactly can you set about saving for your child’s education? Fortunately, there are a few clear steps that can set you on the right track.
Special Savings & Trusts
These are informal options any Canadian parent can take advantage of, basically as a means of investing in a child’s name. Special savings accounts and trusts can be set up as any of a variety of types of investment (index funds, mutual funds, etc.) such that money earned belongs to the child upon his or her reaching a specific age. A relatively small amount put away strategically — and as early as possible — can mature into a significant portion of college tuition costs.
Personal Savings & Investment
This is not a strategy particular to college savings or to developing a fund for a child. It is at least worth noting, though, that some parents simply choose to augment personal savings or set up side investment accounts in order to manage money for college. These options are more familiar in some cases and thus represent comfortable opportunities to grow funds over time. However, they can lead to blurred lines between personal finances and college savings, and they also don’t come with any specific benefits.
Registered Education Savings Plans
Ultimately, RESPs stand out as the plans most specifically built for college savings in Canada. These are plans that exist for this purpose, and involve two crucial benefits. The first is that the government will match up to 20% worth of the first $2,500 put into one of these accounts each year. The second is that the appreciation of funds in an RESP is not taxed. Thus, these plans allow you to get more for your money and ultimately cover the bulk of tuition costs if handled well (and started early).
Discussions about college savings tend to revolve around accounts, big-picture ideas, and large numbers. But do keep in mind also that finding day-to-day savings — and putting them toward college funds — can chip away at things significantly. For instance, plenty of Canadians spend some $5 a day on coffees and teas; cut that habit for just a month now and then, and you can pump an extra $150 into a college fund each time.
Or consider that some 10 million Canadians watched a $65/month streaming service in 2020; cut that for just three months in a given year and you have an extra $195 for a college fund. These strategies might not get you all the way to your goal, but if you’re diligent about them they can help more than you might imagine.
Give these strategies some consideration and you’ll be well positioned to develop a plan that will help your child through college. Not too many things you’ll do for your child are more rewarding!