When it comes to the money to put a child through school, it’s better to start preparing for that day sooner rather than later. With tuition fees rising each year there’s no way of knowing what the cost of post-secondary education will be when your child is ready to take that step.
According to Statistics Canada, university tuition fees in 2009/10 were an average $4,917 — up 3.6 per cent from the previous year. Costs continue to rise faster than the pace of inflation, leading some to believe that children born today will be looking at post-secondary costs in excess of $100,000.
As parents, no one wants to see their child struggle to pay for school and end up in debt. A remedy for this is a registered education savings plan (RESP). An RESP is a plan registered under the Federal Income Tax Act that helps families save for post-secondary education. Income earned on contributions grows in a tax shelter until a child is ready to attend college, university or trade school.
Many of us do save — but very often if is for our own retirement, which is decades away. We tend to forget about saving for our kids’ education which comes much sooner than we think. The reality is that many parents will need and want to help pay for their child's higher education before they retire.
“RESPs are a great option for parents interested in saving for their child’s post-secondary education,” says Peter Lewis, vice president of operations for the Canadian Scholarship Trust Foundation. “If parents make regular contributions, the savings will grow as the child grows. Over the years we’ve seen that saving for a child’s education increases their likelihood of pursuing higher education.”