Modern families are finding it more difficult to afford to pay for daily living expenses, much less extras. They can no longer rely on company pension plans to fund retirement, and must make smart money choices when they are raising their families. Saving for their children’s education and retirement at the same time will likely be more challenging in the years to come.
How Much will the Cost of Higher Education be in the Future?
The cost of higher education will depend on where a family lives and the number of children they have who are planning to attend college or university. Here are some facts to keep in mind when thinking about education costs:
- In a case where there is only one child, this amount may be something that can be realistically included in a family budget. For families with three children, $420.00 per month for education savings may be a bit out of reach. At this level, parents may not be able to pay for an education savings plan and their own retirement.
- Part of the answer will also depend on where they live. In British Columbia, where families are strapped with mortgage payments and probably need two incomes just to stay afloat, there isn’t a lot of room left for savings.
- Education is definitely where grandparents can make a financial impact in the lives of their children and grand children. Grandparents often have more disposable income than their children and so if you can afford it, and especially if you are already give cash gifts to your grandkids, why not invest it for their future instead? Education is the best gift you can give!
Tips for Saving for Grandchild’s Education
- Start early (ideally when the grandchild is born) and take advantage of government grants to help top up the amount in the plan. The power of tax-free compound interest can also help the money grow.
- Contribute those cash gifts you were planning to give on birthdays and Christmas to an RESP (Registered Education Savings Plan) instead.Use a Family Plan RESP, which can have several children in the family as beneficiaries. If one child doesn’t end up furthering their education, his or her siblings can use the money in the plan instead. A course lasting at least three weeks, with 10 hours or more of instruction per week can qualify under government eligibility rules, which means that grandchildren are not limited only using the money to fund diploma or degree programs .
- Discuss your expectations about educational costs with your grandchildren. Let your grandkids know from an early age that you expect them to pay for part of the cost of school. A certain amount of part-time or summer employment earnings should be put into a savings account for this purpose.
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