How to pay for your child’s education is an issue that undoubtedly crosses most parents’ minds as their children grow up. Although it may seem like a far-off event, before you know it, your kid will be graduating high school. This important milestone often involves considerable financial stress as your kid prepares to leave the nest. Making the big leap to university means paying for expenses like tuition, accommodation, food and other education-related expenses. With this in mind, here are a few financial tips to help keep you on track.
Plan ahead—years ahead, that is. It’s not too early to start putting aside a small monthly sum when your child is still a toddler. As your child gets older and progresses through school, try to help them figure out what career would interest them. This, in turn, will help you know how much money you might be forking out. It goes without saying that financing a law degree will involve more planning and resources than a two-year technical diploma. Deciding how to finance a post-secondary degree is a complex task, revolving undoubtedly around one’s financial circumstances. Furthermore, education is increasingly considered a basic right rather than a privilege. Despite this, its cost has not decreased accordingly, making it all the more crucial for families to start planning early.
Get your family involved
Regardless of your child’s career choice, make sure they understand the different expenses their choice of education will incur. Furthermore, suggest that they dedicate a portion of any income they’re making to their post-secondary education. Not only will this encourage responsibility, it may also help them think more seriously about their future educational expenses. Consider areas where you and your family could spend less on physical items, such as gifts or single-use purchases. Bake your kid’s birthday cake, or, if you’re hosting a dinner, make it a potluck instead of hiring a caterer. Or, instead of spending a fortune on the latest gadget, take your child out to eat at a nice restaurant.
RESPs are invaluable
RESP stands for Registered Education Savings Plan. RESPs should be an integral part of your financial toolkit, as they’re a special type of tax-exempt investment. Unlike a regular savings account, you don’t get taxed on whatever interest you make. You don’t even need a bank account to set up an RESP. What’s more, any family member, friend or other person can open one up with your child as the beneficiary. If you’re not sure of your child’s educational plans when you set up the RESP, there’s no need to worry. You can contribute to it for up to 31 years and will have 35 years to use up the funds. Therefore, even if your child doesn’t start university right away, they’ll still have plenty of time to use the funds. Furthermore, if your child decides against continuing their education, you can transfer the money to another RESP.
To maximize the efficiency of your investment, be sure to set up automatic contributions. However, if this isn’t financially feasible, some RESPs allow you to make a deposit whenever it’s most convenient for you. If you’re just setting one up, there is no annual contribution limit. Click here to learn more about RESPs.