Higher education is expensive, and many students come out with a large amount of unwanted debt when they graduate. While scholarships, grants, part-time work, and student loans are common ways to finance the cost of post-secondary education, there are some alternative ways to manage the costs.
Saving for college early means you and your child will benefit from the power of compounding, which, in turn, means that you will be more equipped to pay for tuition when your child begins their higher education.
Whether your child is still riding in a stroller or asking to borrow the keys to your car, here are some options to consider when planning how to finance your child’s education after high school at every stage of their growth.
Saving for College
Saving for college? Implementing and maximizing the benefits of these cost-reduction strategies requires forethought and diligence.
At a time when diapers and childcare costs dominate your monthly budget, saving for university may seem like an unlikely possibility. However, it’s still a wise decision to open a Registered Education Savings Plan (RESP) for your child as early as possible through providers like CST Consultants Inc.
Want free money?
Even though money may be tight, contributions made to an RESP can add up quickly, even with just a small amount to start. Parents can suggest grandparents, friends and other relatives help out by making contributions as birthday and Christmas gifts, instead of buying toys or clothes.
RESPs have a feature that makes them unique – access to government grants like the Canada Education Savings Grant (CESG) and some provincial government grants. The basic CESG matches 20% of the first $2,500 you contribute to your child’s RESP each year, up to a lifetime maximum of $7,200 per child. That works out to an extra $500 paid directly into your child’s RESP every year.
In addition to benefiting from government grants, flexibility is also built into RESPs. Parents can set their financial goals and make regular contributions to their RESPs that work within their budgets.
Now that your child has entered school, it may be time to start teaching them about the value of a dollar, and how to practice good financial habits. Perhaps it would be wise to give them small tasks to complete around the house and then reward them with a small allowance. By teaching them the difference between spending versus saving, your child will begin to understand healthy financial habits necessary for their future.
During this stage, it is equally important for parents to consider how much of their child’s education costs they are willing to cover. For instance, will you want them to fund some of their own education? Once you’ve set a goal and determine how much you will need to contribute in order to achieve it, you will need to monitor your RESP and revisit those goals annually.
If you haven’t been maximizing your contributions to get all available grant money, it’s not too late to catch up. Just remember, unused CESG amounts accumulate for use in later years until December of the year your child turns 17.
This is a great age to encourage your child to seek outside employment. If your child’s class schedule permits it, taking on a part-time job to make $300 fast every few days and getting some savings goals can help your child participate in saving for their schooling. The more money they can save, the less money they may need to borrow. An added bonus – students who try to find work related to their intended career will build connections that could potentially lead to better job opportunities upon graduation.
This is also the time for parents to start learning about how to withdraw funds from their RESP so that tax is minimized during the university years. If you have a CST Plan, you can speak to your CST Sales Representative or contact the Customer Experience department and they will guide you on what steps to take the year before your child leaves for university.
The bottom line is – there are many ways parents can save money by using money-saving apps or other ideas for their child’s higher education starting at every age group. One of the most important things to do is to take advantage of an RESP as early as possible to benefit from the available government grants and tax benefits.