Four Ways to Save For Your Child’s Education
The cost of higher education is continually increasing while the need for a college degree grows in demand. Parents and students have little choice but to invest in an education. Still, the burden of student loans and their accompanying debt can make a college degree seem like a liability more than a benefit. Here are four Education Funds Plans that can pay for your child’s education, help you to avoid incurring student loan debt and provide your child with the benefits of a worthwhile education.
1) Registered Education Savings Plans
RESPs are Canada’s premiere education savings plan, but it is used in cooperation with a number of Education Funds Plans. Grants and other education savings funds are deposited into an RESP and managed by the RESP’s promoter. There are three entities involved in the registered education savings plan RESP process. The subscriber opens the account and makes deposits. The promoter manages the fund by taking donations from the subscriber and delivering funds to the beneficiary. The beneficiary uses the funds to pay for higher education costs.
2) Canada Learning Bond
An RFP’s promoter determines how the fund is handled. This includes managing the number of payments and contributions necessary. Not every subscriber has funds to meet higher education costs. In this instance, subscribers turn to grants such as the Canada Learning Bond. As of 2018, the Canada Learning Bond is a $2,000 bond that is deposited into the RESP. If the beneficiary never makes use of this, then it is returned to the government when the RESP is closed.
3) Canada Education Savings Grant
While the Canada Learning Bond is only available to Canadians with modest incomes, the Canada Education Savings Grant is paid into registered education savings plans regardless of family income. Employment and Social Development Canada pays 20% of annual contributions, up to $500 annually, and places it into a qualifying RESP account. The upper limit for the account’s lifetime is $7,500.
Additional Canada Education Savings Grant funds are quite simply an extension of the base grant that is mentioned in the above paragraph. This additional funding is dependent upon a family’s income. Qualifying families can see an additional 20% donation or an additional 10% of the annual $500 donation. Since incomes vary, this amount is dependent upon adjusted income and donations. There is still a cap to these additional contributions.
4) Provincial Education Savings Incentives
Opening an RESP is not free. However, provincial incentives exist to help families open an account. The Quebec education savings incentive, the Saskatchewan Advantage Grant for Education Savings and the BC Training and Education Savings Grant program are three entities that can assist families in opening a plan.
Beneficiaries are able to draw on their funds when they turn 16 or 17 years of age. The earlier a family opens an RESP and begins saving, the better chance that their beneficiary can receive the full amounts offered by Employment and Social Development Canada.