By Heather Holden, PhD The Afro News Vancouver
University tuition has been increasing by more than the rate of inflation, according to the Statistics Canada’s report, The Daily (October 9, 2008). Add to that the trend of decreasing government funding, and the high cost of post secondary education will become even more of a barrier to entry. You have a number of options to consider if you’re starting to plan for the future education of the children in your life. Financial aid and scholarships are certainly an option for many, but they cannot be counted on to cover the full costs. And although Canadian students can apply for government student loans, not everyone qualifies. Also, the interest on these loans begins to build up the moment a student ends full-time studies, so debt is an additional pressure on top of finding a job after graduating. Setting up a Registered Education Savings Plan (RESP) is a popular option. This is a savings account that allows you to defer tax payment on the income earned in the account for the purpose of a beneficiary’s educational expenses. As a further incentive, the government introduced the Canadian Education Savings Grant (CESG). Anyone who contributes to an RESP receives a grant that is a percentage of that contribution, with an annual and lifetime maximum. There are, however, a number of restrictions and variables that should be understood prior to creating your strategy. Starting early is key to success because the fruits of long term compounding of earnings can be a nice surprise if planned appropriately. While conservative, low risk investments like GICs or Canada Savings Bonds may seem most suitable, given a long time horizon and tax free compounding, slightly riskier investments can be appropriate. Let me help you determine the best strategy for your particular situation—contact me to discuss your options.
Wealth Advisor, ScotiaMcLeod
