What Are the Best Ways to Save Money for Kids Education

Rayna Schroeder
Jul 20, 2017 · 4 min read

As a parent, you want your child to have the best post-secondary education possible. Unfortunately, university fees keep rising relentlessly across Canada making a quality tertiary education very expensive to acquire. Ultimately, this means your kid’s education will be among your family’s largest expenses. Tuition aside, you still have to pay for books, transportation, sports and union fees e.t.c. All these expenses add up making the cost of taking your child to college or University more exorbitant. By saving money for your kid’s education early you not only ensure he’ll have a high quality learning experience later on but you also benefit from an increased sense of security and peace of mind.

Here are 5 of the best ways to save money for your child’s education.

1. The Canadian Education Savings Plan.

The Canadian education savings plan allows for parents in Canada to start saving for their child’s education from as early as day one with the Canadian government pitching in as well to boost the parents contributions. To begin, parents simply need to open a Registered Education Savings Plan (RESP) from any credit union, bank, or financial institution and start making deposits.

You can get tremendous information about RESP from providers like Knowledge First Financial to help you determine the best plan for you.

This method is applauded as being among the best because parents get bonus money from the government i.e. what is considered as the Canadian Education and Savings Grant, and also because they avoid paying taxes making it easier to pool larger amounts. It is also more friendly to families that are financially challenged. If a family’s net income is considered below average, their RESP may be eligible to receive Additional Canada Education Savings Grant i.e. 10 or 20% more money to the amount that is initially distributed by the government to RESP holders.

2. Prepaid tuition plans.

A prepaid tuition plan is one of the smartest saving plans available. Parents can purchase college credits at rates slightly above the current market prices and later redeem them when their child is ready to attend school. Some outstanding benefits of this plan include the fact that it guarantees parents tax-free withdrawals on their earnings provided these amounts are used to invest in tertiary education savings, and also that the principal (savings) is protected against market fluctuations. Also, parents spend less in the long term. Once the annual rising cost of education is factored into the equation parent’s out of pocket expenses are expected to dwindle significantly in the years to come when they cash in than they would have had they not opted for a prepaid tuition plan.

Prepaid tuition plans vary. It is suggested to go through multiple plans and providers to determine the best plan for your child.

3. Brokerage Accounts.

A brokerage account can be compared to a savings account only with more benefits. Unlike your typical savings account, a brokerage account allows for the buying and selling of everything from bonds and stocks, to currency and mutual funds among others. Parents who choose to save for their children’s education can benefit from the great flexibility of this account and the enormous potential it has for generating high returns on savings over the long term. Parents should open a brokerage account and link it directly to their paycheck for the pre-determined after-tax income to be wired to the account each pay period. This will work to the parent’s advantage by streamlining the savings process.

4. Your company’s college savings plan.

Checking if your employer/company offers a college savings plan and the nature of the available plans will help parents decide on the best way to save for their children’s future. Some employers will set up an extra account where specified payroll deductions of their employees will be channeled to help them save for their kid’s education. Checking whether your company also offers private scholarships for children of their employees who are currently enrolled in the company’s education savings programs as these can help mitigate the huge costs of higher learning when the times comes.

5. Family Trusts

It is advised to use family trusts if the parents involved presently control a large sum of money which they would like to set aside for their children’s future education. With the help of a savings and financial expert, parents can distribute the funds to their various children to use when they become of age and still reap other benefits such as marginal tax deductions, protection of the funds from future wealth taxes that may be birthed e.g. inheritance tax, as well as confidentiality since family trusts are not subject to public registration.

)
Welcome to a place where words matter. On Medium, smart voices and original ideas take center stage - with no ads in sight. Watch
Follow all the topics you care about, and we’ll deliver the best stories for you to your homepage and inbox. Explore
Get unlimited access to the best stories on Medium — and support writers while you’re at it. Just $5/month. Upgrade