Saving for your child's education

The realities of today's job market

Many jobs require more than a high school diploma. Students now need more skills and knowledge before beginning their careers–whether they work in an office or a workshop.

So if you're wondering whether you need to invest in your children's future, there's really no question about it.

But the cost of an education is always growing. Besides school fees, students have to deal with other expenses, especially if they're studying away from home. A year away at university can easily cost several thousand dollars.

It's hardly surprising that many parents are asking how to plan and save money for their children's educations.

To save money, you need to pull out all the stops and include the expense in your budget, as if it were a bill to be paid. Set yourself a realistic goal. Ideally, 10% to 15% of your net income should go to savings.

If your finances are tight, try starting with 2% to 5% of your income.

If you're ready to do what it takes, go on to step 2.

Tools and tips

A registered education savings plan (RESP) is an excellent way to save money for your child.

It's a proven method that helps you grow money more easily to cover the cost of a post-secondary education for your children, grandchildren or any close child.

What's an RESP?

The main feature of an RESP is that your investment's returns are tax-sheltered. You can contribute a maximum of $50,000 per beneficiary (child) for the duration of the plan.

This contribution may qualify the beneficiary for:

• a Canada Education Savings Grant
• a Canada Learning Bond
• a Quebec Education Savings Incentive

You can withdraw your contributions in total or in part at any time, without penalty, unless your contributions are invested in a term savings (also called a guaranteed investment certificate or GIC). If your money is in a term savings, you'll have to wait until your investment matures to withdraw it.

Is this investment right for you?

It's ideal if you want to build tax-sheltered savings to pay for your child's post-secondary education.

Main advantages

• You have several investment options: term savings (or GICs), daily interest accounts, specialized funds.
• You have several payment options: weekly, every 2 weeks or monthly.
• You may designate a different beneficiary at any time, including yourself if you decide to go back to school.
• You may transfer funds from an RESP into your RRSP if the beneficiary decides not to continue studying (under certain conditions).

If an RESP is not for you or if you want to save more than the maximum allowed, there are other savings options.

Some people use life insurance, while others put their money in trusts or trust accounts.

However, with these savings alternatives, the beneficiary won't be eligible for government grants.

Now that savings are covered, you and your children will be ready to pass the test.

You've done everything you could to prepare for your children's education.

The rest is up to them.

Higher education means better opportunities in life.

Plus, they have more chances of keeping a job in hard times.

Now it's their turn!