RESP- Planning for Your Children's College or University Education

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Are You Wondering How Your Kids Are Going To Pay for College or University?

First Let’s See How Much It Would Cost For them to go to a post-secondary school.

Let's Look at Current Average Tuition for College or University

The cost of post-secondary education has skyrocketed and will likely continue to do so. 

According to a Statistics Canada study, the average annual post-secondary tuition is $6,463 tuitions alone. This number is up 31% since 2006, an average annual increase of roughly 3% per year. When you consider textbooks and other educational materials, this would probably inch closer to $10,000 per year.

So How Much Does College or University Actually Cost Today?

A 2018 study conducted by McLean showed an average of $9,300 in annual education costs for those who are living at home and double that at nearly $20,000 per year for students that are studying away from home. The biggest expense was rent, accounting for 40% of the cost of going to college or university.

Assuming an average annual education cost of $10,000 for students who will stay at home and $20,000 for out of city students, we can estimate the cost of a 4-year undergraduate degree at $40,000 and $80,000, respectively. 

Here is a set of projected costs depending on your children’s age, assuming they start studying at 18 years old.

Look at the chart showing how much we estimate the costs to be when your children go to school.

If you’re creating a plan for your 5-year-old child, you will estimate that post-secondary would cost roughly $60,000. 

How Much Will College Cost When They are In School?

Age TodayCost When Your Children Go to School (Staying At Home)Cost When Your Children Go to School (Different City)
Under 1$68,097$136,195
1 Year Old$66,114$132,228
2 Years Old$64,188$128,377
3 Years Old$62,319$124,637
4 Years Old$60,504$121,007
5 Years Old$58,741$117,483
6 Years Old$57,030$114,061
7 Years Old$55,369$110,739
8 Years Old$53,757$107,513
9 Years Old$52,191$104,382
10 Years Old$50,671$101,342

So How are Most Canadian Student's Paying for Post Secondary?

Here are the most common sources of funding for post-secondary education:

Your Kids Can Take Out a Student Loan To Pay For School

According to Development Canada’s 2017 report, 497,000 Canadian students borrowed from the student loan program with a total of 2,600,000,000 in loans provided or $5286 per recipient.  With the average student finishing their school with $13,456 in student loan debt, but this includes full-time students in 2-year diploma programs. The McLean Study indicates that the total loans are probably closer to $25,000 if loans are taken out through a 4-year undergraduate program.

Your Kids Can Work While The Are In School

Students can work on campus or seek part-time employment throughout the school year. With the median income of $12,700 for 16 to 24-year-olds, it possible for a sizable chunk of their education costs to be self-funded. Of course, this would depend on the course load and other factors, such as job availability, when they are actually in school.  

You Can Provide Financial Support for Kids Can Work While The Are In School

The same McLean’s study indicated that the majority of students without RESP funding got financial support from family members like parents and grand parents.

Hopefully, mom and dad, we’re not going in debt to pay for Jr, because he can owe money all on his own, see student loans above.

 

You Can Provide Financial Support for Kids Can Work While The Are In School.

The same McLean’s study indicated that the majority of students without RESP funding got financial support from family members like parents and grand parents.

Hopefully, mom and dad, we’re not going in debt to pay for Jr, because he can owe money all on his own, see student loans above.

 

Your Kids Can Apply for Scholarships and Grants while they are in School.

Scholarships are plentiful, and surprisingly not enough students apply for them. Grants are special programs that waive the repayment of a portion of student loans. In 2017 the average qualifying student received $2,673 in grants.

Your Kids Can Apply for bank loans while they are in School.

Bank Loans: If for whatever reason, students do not qualify for the Student Loan program, they may need to take out a loan from a bank with far higher interest rates and less favourable repayment options.

You Can Start Saving in an RESP to Help Pay For Their College Education

Registered Education Savings Plan or RESP. The RESP is an investment account designed to entice parents to save for their children’s education. It allows investments that are earmarked for college or university to grow tax-free. It also gives you an opportunity to receive up to $7200 in Canadian education savings grants. This is done through a 20% top-up for your contributions to your children’s RESP. The “government top-up” could be higher for lower-income families.
The income would then be taxable to the student, not the contributors to the RESP.
Here is a simple example based on our estimates above.

If you were to save and invest in tax-free savings account for your 5-year-old child’s education, earning a 6% return on your investment, you would need to contribute $249.50 per month to reach the $58,741 needed, assuming you have no other savings for your child’s education.

But if this was with an RESP instead, you would only need to contribute $207.92 every month.

Let’s plan for your children or grandchildren’s education together. if you have any questions, get in touch.

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