CST, one of Canada's largest RESP companies offers 5 helpful tips
TORONTO, Sept. 8, 2016 /CNW/ - Parents saving with a Registered Education Savings Plan (RESP) for their child shouldn't worry about the latest data on tuition fees coming from Statistics Canada, not if they plan ahead.
"The numbers released by Statistics Canada today shouldn't come as a surprise to anyone paying attention to the increase in fees over the past decade and half," says Peter Lewis Vice President at CST Consultants Inc and the Canadian Scholarship Trust Foundation, one of the largest distributors of Registered Education Savings Plans in Canada.
The annual rate of fee increase has remained steady between 3-4 per cent over the last 5 years. But if you take into account an annual rate of inflation of about 1.5 per cent (CPI Canada); the actual rate of fee increase stands realistically at 2 per cent after inflation.
"This year's data shows a 2.8% increase in tuition fees for full-time studies in an undergraduate program, so after inflation we're looking at more like a 1.3 per cent increase this year," says Lewis. "Since these numbers have remained steady, parents can actually readily plan for that increase."
Here are some helpful tips for parents to get ahead
- Start saving for your child's college or post-secondary education early. The earlier you start saving for your child's education, the more your savings can benefit from the power of compounding. If you start investing $210 every month for your new born, their RESP could be worth almost $30,000 more than if you start when your child is five.
- Invest in a Registered Education Savings Plan (RESP) over other investment vehicles. An RESP is a tax-sheltered way of investing for your child's education and where parents can take advantage of free money offered by the government by way of the Canada Education Savings Grant and the Canada Learning Bond. If your child is a Canadian resident under the age of 17, they are eligible for the Canada Education Savings Grant (CESG), which matches 20 per cent of the first $2,500 you contribute to your child's RESP each year up to a lifetime maximum of $7,200. There are several other provincial grants you can apply for depending on your province of residence and eligibility.
- Talk to your child about their post-secondary education plans and set a budget accordingly. Have regular conversations with your child about what they want to be when they grow up and what it will take to get there. This includes the courses and grades they will need as well as how much it will cost them to get there. Make it a shared responsibility and track your progress together. Check out some of these cool careers of the future to spark the conversation.
- Don't rely on student loans for your child. If you borrow an amount equal to the value of your RESP, your student loan repayments could be more than your RESP contributions. Borrowing doesn't just cost more in the long run, but it also puts the burden of debt on your child.
- Leverage available tax credits and child care benefits. Federal benefits and credits are there; use them. From the time you bring your bundle of joy home to the time they are ready to go to university, government can help you cover the cost of education if you save wisely.
For the average student who is a beneficiary of a Registered Education Savings Plan (RESP) the latest tuition fees shouldn't be a scary number. According to Employment and Social Development Canada, the average student withdrawal from an RESP was $8,025 in 2014. That's enough to pay for the tuition fees listed in the latest Statistics Canada data.
SOURCE CST Consultants
For further information: For more information or to set up an interview with Peter Lewis and/or a family in your area please contact: Edyta McKay - Manager, Corporate Communications, CST Consultants Inc., Office - 416 445-7377 x 303, Mobile - 416 276-5001, Edyta.McKay@cst.org; Jennifer Palisoc - Communications and Social Media Specialist, CST Consultants Inc., Office - 416 445-7377 x 252, Mobile - 416 602-2849, Jennifer.Palisoc@cst.org