Whether you’ve just welcomed your bundle of joy into the world or you’ve been raising them for years, it’s likely that you’ve given little thought to the high costs of college they’ll likely be facing down the line. With many students leaving higher education with more debt than they can handle, it pays to give thought to how you’ll be able to help your student financially in the future and start saving now.
Most loans are complicated and unnerving and none should be entered into lightly, whether you’re looking for financial aid or a quick loan through service providers like Wonga (visit the site here). But by starting now, you can guarantee a happy and less stressful future for your child.
If you’ve decided to start saving for your child’s future education, the first step is to see how much you should be saving. While figuring tuition may be easy, figuring the cost of books and living expenses is a little trickier. Give it your best shot, and remember that even if you don’t end up saving for the entire cost of education, being able to pay off a large chunk of the debt your child will be taking on will help tremendously. Use websites like CanLearn.ca to create a savings plan that’s easy for you to handle on a monthly basis but will still get you to your goal.
The next step is to choose what type of savings you want to tie your money up in. You can choose a regular savings account with a moderate interest rate at your local bank for convenience, or if you’re looking to get the most for your money, look into a Registered Education Savings Plan or RESP. RESPs are useful not only because they allow tax-free contributions into a plan until you’re child is ready to use the funds for higher education; it also provides incentives like the Canada Education Savings Grant (where 20% will be added to the first $2500 contributed to the RESP) or the Canada Learning Bond (where $500 will be automatically added, plus $100 a year until the child reaches 15 years of age). These plans offer money on top of money, which you might as well be getting if it’s just sitting there.
Probably the most important step is being able to not touch that money. You’re putting that money aside for a reason and it’s useless if you just end up spending it on a family vacation. RESPs or trust savings can be helpful if you’re the type of person who has a hard time holding onto a savings. These options have penalties for withdrawals, usually equal to whatever interest was earned on the account plus a small fee. It’s difficult to see a large sum of money sitting untouchable for such a long period of time; but the peace of mind your child will feel when they enroll for college will be worth every penny.