Your children are aiming at college or university and you're aiming at retirement. That's not so unusual these days, as more and more parents have chosen to delay marriage and children until they (and their finances) were more "mature."
If you're in that growing group, you've probably already initiated a savings plan for retirement, but you may still need a plan to pay for that increasingly costly post-secondary education. Here are a few tips to ensure your future does not collide with your children's future:
Get Registered
A Registered Education Savings Plan (RESP) is a terrific way to save for an education and to save on taxes, too. Though contributions are made with after-tax dollars, you do not pay tax on the growth of investments held within an RESP until money is withdrawn. If the growth is paid to your child while attending an eligible post-secondary education program, you won't pay taxes on the growth; your child will, and maybe in a low tax bracket.
The government will also kick in some money. Through the Canada Education Savings Grant (CESG) program, the first $2,500 you contribute each year into your child's RESP will receive a federal grant of at least 20 per cent of your contribution*. With the recent removal of the annual maximum contribution limit and an increase in the lifetime maximum contribution amount to $50,000, it is now easier to accelerate contributions into an RESP.
Get Bonded
The Canadian Learning Bond can also help accelerate your education savings plan. It is available to children born in 2004 or later whose parents or primary caregivers are receiving the National Child Benefit Supplement. Alberta residents may also qualify for the Alberta Centennial Education Savings Grant (ACES) which can add up to $500 to your child's RESP. Quebec residents can qualify for the Quebec Education Savings Incentive, which can provide an additional $250 each year to your child's RESP*.
Get Flexible
With the education costs accelerating, it's prudent to look beyond RESPs. A Tax-Free Savings Account (TFSA) could be a good choice to invest in. Other options include trust accounts and life insurance.
Get retirement-ready
Develop a realistic retirement plan that includes the fact that your children may still be completing their education at that time. Your plan could include putting off extensive travel or exploring alternative work arrangements, like phased retirement, so you can spend more time with your children.
Your professional advisor can be a valuable source of information on education savings options and what you can do to help put your child through university while still enjoying the retirement of your dreams.
*The Canada Education Savings Grant (CESG) and the Canada Learning Bond (CLB) are provided by the Government of Canada. CLB eligibility depends on family income levels. Some provinces make education savings grants available to their residents.
- Managing Your Money, written and published by Investors Group Financial Services Inc. and Investors Group Securities Inc., presents general information only and is not a solicitation to buy or sell any investments. Contact your own advisor for specific advice about your circumstances.
