Education Savings Plans

Will You Save Enough For Your Children's Education?

The cost of a post-secondary education has been rising inexorably for the past two decades. Some put the cost at over $15,000 a year at a Canadian university.

If your children will be attending a U.S. college, the annual cost could be much higher. Recently, private universities and colleges have been set up in several provinces with much higher tuition than government-supported institutions.

Many parents now wonder if four years of post-secondary education will be enough for their children. To compete successfully in today's workplace, it is increasingly necessary to have a post graduate degree.

Chances are that your son or daughter won't earn much more than minimum wage during the summer, so the burden of covering education expenses will largely fall on your shoulders. But just how much will university cost and how much must you save each year to ensure your children get the education they need?

What Will It Cost?

Today, four years of university will cost about $60,000 using the $15,000 annual estimate. If one adds a 5% inflation factor for tuition, living expenses and other costs, in five years, that rises to $76,578. In 10 years it jumps to $100,388 and so on.

How To Boost Your Savings

There are several ways to make your savings work harder, which means your goals for your child's education can be realized. First, investigate RESPs (Registered Education Savings Plans). While contributions to the plan are not deductible, income earned in the plan is tax-sheltered until distributed to the student beneficiary, whose income will likely be too low to attract tax. As well, contributions are eligible for up to $500 a year in government assistance under the Canada Education Savings Grant program.

In Trust For (ITF)

ITF accounts are an excellent way to give money to children without handing them cash. Teach your children the merits of investing by providing them with a first-hand example. Take advantage of the opportunity to save money by having your children pay the tax on any capital gains.

ITF accounts are set up with a trustee, a beneficiary and a contributor. The trustee and the contributor must be different people in order for the contributor to reap any tax benefits. The child is the owner of the account, and thus all money must revert to the child if it is withdrawn. Let us guide you through opening an ITF account. Your young ones will thank you for it. Finally, be sure to invest any child tax benefit in your children's names. Any income earned on the funds is taxable to your children.

At BURGER Financial Services, we can help you set up the most efficient programs that will allow you to accumulate the funds necessary for your children's post secondary education.