Average tuition costs in 2022/23 for Canadian undergrad students is around $6,834 per year, and that figure doesn’t include books, residence, or meals. Even if “meals” equate to mac and cheese, it’s still a lot of cheddah. It’s likely that costs will be even higher once your middle school kid is ready to leave the nest. Starting early and saving often is the smartest way to save for your child’s post-secondary education.
Whether your kids plan to head to university, college, or a trade school, here’s how parents can save for their child’s post-secondary education.
How to save for your child’s education
Establish an RESP
An RESP (Registered Education Savings Plan) is a powerful tool to easily save for your child’s education. Just like an RRSP, your money will grow tax-free, as long as it stays in the RESP account. There is no limit to your annual contribution, but lifetime contributions are capped at $50,000. The Canadian Education Savings Grant (CESG) is designed to boost your savings efforts further. The Government of Canada contributes 20 cents on every dollar you add to the RESP, up to a certain limit. There are a number of RESP products available, so it pays to educate yourself on the different options, depending on the age of your kids.
Open a TFSA
A Tax-Free Savings Account (TFSA) is another way to save for your child’s education. Just like an RESP, your money will grow tax-free. You can also withdraw money sitting in a TFSA, tax-free. There is a limit to how much you can contribute every year, and is capped at $6,000. However, a TFSA gives you the flexibility to use the funds for any reason—not just education costs. So if your child decides to take a different path in life, you’ll still be in a position to help them on their way.
5 ways to save for your child’s post-secondary education
Many of us think we don’t have enough room in our budget to make room for saving for post-secondary education. But with a little creative thinking, it’s possible to come up with the cash you need now to save for those tuition bill headaches down the road.
Here are the five best way to save for your child’s education in Canada:
1. Make extra cash
You don’t have to take on an extra part-time job to save for your kid’s university. Even small, creative ways of making some extra money will add up over time. Those bulky baby items taking up room in the garage? Trade-in your stroller or crib for cash at a used goods baby store, alternatively sell them yourself on websites like eBay and Kijiji. Gently worn children’s clothes, especially designer label items that seemed so necessary at the time, can also mean extra money in your pocket. Alternatively, turn your hobbies into a side-hustle. If you’re a whiz at whipping up cakes, offer your services to make children’s birthday cakes, or if you’re artsy, set up an online store and sell your creations.
2. Trim your budget
If you’re serious about finding room in your budget to establish an education fund, look for ways to cut out items in your current budget. Do you really need cable as well as all those streaming service subscriptions? What about your phone or internet plan? Consider switching to a cheaper service option or bill negotiation services. Cutting back on little extras like dinners out and extravagant birthday parties also make a difference. Your kid will still have a memorable birthday even without the professional entertainer. Buy quality second-hand items. It’s easy to find everything from gently used soccer cleats to video games.
3. Enlist family and friends for support
Birthdays, holidays, and special occasions are great opportunities to get your family on board. Rather than the latest video game, ask grandparents, friends, or aunts and uncles to beef up your child’s education savings. Alternatively, encourage them to pay for experiences you’d normally cover – like an art class or a visit to an amusement park in the summer – and invest that money yourself. After all, every little bit helps.
4. Take advantage of your Canada child benefit
Make the most of living in a country like Canada and consider saving your monthly Canada child benefit (CCB). The tax-free payment to eligible families helps cover some of the costs of raising a child under the age of 18. Stashing away even a portion of what you receive is another way to boost your child’s education savings.
5. Get your kids on board with saving money
Getting your child involved in saving for their own education is a great way to help raise money-smart kids. Older kids can get a part-time job or set up a business mowing lawns. Encourage them to save part of what they earn towards their own education. If your kid is too young to work, consider getting Mydoh. The app lets your kids earn money through tasks and chores that you set up for them. Not only will they learn the value of a dollar, but you’ll also free up some of your time by having someone else take out the garbage.
Start saving now for your child’s future education costs
Saving for tuition is only daunting when it is put off to later in your child’s life. It is important to start early so that you can save smaller amounts regularly, over a longer time. They say it takes a village to raise a child, so get others involved. That way, you’ll have a whole team of loved ones helping you save for your child’s education—including your kid.
Sign up for Mydoh today. Not only will you get a head start on saving towards the day you’ll be driving them to their halls of residence, but you’ll also help your kids build good money habits that’ll see them through to graduation and beyond.
Download Mydoh today to learn more.
This article offers general information only and is not intended as legal, financial or other professional advice. A professional advisor should be consulted regarding your specific situation. While the information presented is believed to be factual and current, its accuracy is not guaranteed and it should not be regarded as a complete analysis of the subjects discussed. All expressions of opinion reflect the judgment of the author(s) as of the date of publication and are subject to change. No endorsement of any third parties or their advice, opinions, information, products or services is expressly given or implied by Royal Bank of Canada or its affiliates.
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