Thursday, May 7, 2015

Have You Started Yet?

What’s holding you back from saving for your children’s education?  Is it one of those items on your to-do list that you can’t seem to complete?  In the end, it’s not about you. It’s about your children and their future. That makes all the difference.

Many Canadians are not taking advantage of the government's generosity to help fund their children’s education.  As parents, we always tend to want a better life for our children. I am not saying you need to bear the full burden of education costs.  There’s merit in sharing the responsibility with your child.  A sense of pride over the accomplishment of acquiring an education diploma, certificate, or degree can be shared by everyone.

The most amazing contribution you can make is simply starting early, practically when your child is born.  When you start early, the amount tucked away can grow into a small fortune. 

Consider this:

Even a contribution of $2 per day or $60 per month over 18 years (without factoring any earnings) would be $12,960.  Saving as little as a “toonie” a day is more than you would have had if you’d never started.

Education breaks the cycle of poverty.  Having seed money for a child’s education will allow them to acquire basic skills through a technical education program and increase their chances for new job opportunities. With a better paying job, students can then save money to further their own education if they choose to increase their knowledge or branch into new areas.  Whether students attend a post-secondary education facility or study on-line through distance learning programs, acquiring an education has become easier.  A small step to help initiate these opportunities may begin with a much-appreciated education fund.

Being overwhelmed about saving a mere $40,000 to fund a four-year university program (without including room and board) can prevent any parent from starting an RESP. Consider the benefits, though. Having some money put away for education is better than not having any money; and borrowing less for education is better than borrowing for the entire cost. You’ve probably heard the cliché, “every tiny bit helps”.  Just get started.  

Live, laugh, love, and save doesn’t have to be that difficult.  There are government programs to conquer the overwhelming task of saving to fund education expenses.

The Government of Canada offers a Registered Education Savings Plan which can decrease the financial burden of funding the cost completely on your own.   The two parts to this program are:  the Canada Education Savings Grant (CESG) and the Canada Learning Bond.

The Education Savings Grant. For every dollar you contribute, the amount will be matched by an education grant of 20%. For Saskatchewan residents, the provincial government will contribute an additional 10% towards every dollar deposited.  That’s 30% in education grants. Referring to the “Toonie-A-Day” challenge, your investment of $12,960 will grow by 30% to create a whopping $16,848 by adding the grants proceeds of $3,888. This grant certainly could fund part of a school year’s tuition.  

The Canada Learning Bond. Depending on your family’s net income, the initial $500 Canada Learning Bond can be deposited to your child’s education plan without the need for you to deposit any money.  All you are required to do is open a Registered Education Saving Plan and have a Social Insurance Number for both your child and you.     

It’s not an “All-or-Nothing” program, though.   The grant entitlement is matched up to the maximum contribution per year of $2,500 (or) up to $5,000 if your child has carry-forward room from previous years with the maximum lifetime contribution being $50,000. Most people may not be able to deposit the maximum annual amount for each child.  It’s important to note that the program is designed so you contribute the amount that you can afford and receive the grant matched to your specific deposit.  If you wish to learn more about the things you need to know about the Registered Education Savings Plan, click here for further details.  

The downside is if you don’t start saving early and contributing bit-size morsels to the education basket, you may experience enormous remorse when you wave “good-bye” to your children as they head-off in pursuit of their post-secondary education, saddled with student loans. 

Mark Twain’s quote appears fitting to our discussion on saving. “Twenty years from now you will be more disappointed by the things that you didn’t do than by the ones you did do.”   Could you have exerted more effort in saving money for your child’s education to be freed from total reliance on student loans?

Even if you still haven’t set up an RESP (Registered Education Savings Plan) for your family, the best time is now while your children are under seventeen years of age. One day in the not-so-distant future, your child will thank you and you will be grateful for taking action.

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