There's help for parents trying to save for their children's education



    TORONTO, Oct. 9 /CNW/ - There is an old saying: "There are lies, damn
lies, and statistics." The implication is that statistics are not necessarily
reliable - and some believe they can be twisted and turned to get them to say
what you want. In some cases, that may well be true. But when it comes to
post-secondary education for our children these days, the statistics are
probably bang on.
    What they say is that it is increasingly necessary to have post-secondary
education or training to find employment in today's economy. According to
Statistics Canada, between 1990 and 2002, over three million jobs were created
that required some form of post-secondary education or training. During the
same period, there was a net loss of over one million jobs that required a
high school education or less. It is estimated that, today, more than 70% of
jobs require some type of post-secondary education. And that percentage is
likely to rise in the future.
    The statistics also tell us that as post-secondary education has become
more important, the costs have also been rising. Again, according to
Statistics Canada, between 1982 and 2002, the costs of post-secondary
education rose by an average of 8.1% a year. Today it can easily cost anywhere
from $20,000 to close to $100,000 to cover the costs of four years of
post-secondary college or university education for a child - depending on
whether a student lives at home or away from home. That is a real financial
challenge for parents or anyone who is helping a young person today obtain
post-secondary education and training.
    Many Canadians who are earning lower levels of income often feel that it
is beyond their ability to be able to save enough for their children's
education. The amounts that are needed can seem pretty scary. And this can
leave people disheartened and discouraged about saving for the future. This,
in turn, can mean that many young people miss out on post-secondary education
- or face the necessity of borrowing large sums of money to pay the costs.
This borrowing can leave them with large debts as they begin their working
lives.
    So we face a situation today where post-secondary education and training
is becoming more and more essential; the costs of post-secondary education and
training are rising; and more and more young people are facing a challenging
future - either unable to obtain a post-secondary education, because they
can't afford it, or burdened by high debts they find necessary to be able to
get their education.
    It can all seem a little overwhelming. That is why the federal government
has established two education savings incentives to help families save for
their children's post-secondary education and training. One of these saving
incentives is the Canada Education Savings Grant (CESG). Depending on your
family income, for whatever amount is saved up to $500 in a Registered
Education Savings Plan (RESP), the federal government will add an additional
20, 30, or 40% of the amount saved. Then, regardless of your family income, if
you save more than $500, up to a maximum of $2,500 per year, the federal
government will add 20% of the amount saved to your RESP. Over time, the CESG
could add up to a total of $7,200 in savings - and that does not include the
interest that can be earned.
    The other federal government savings incentive is called the Canada
Learning Bond (CLB), which is specifically aimed at helping those families
with a modest income. If your family income is below $37,885 in 2008, your
child was born after December 31, 2003, and, your family receives the National
Child Benefit Supplement as part of the Child Tax Benefit, your child's RESP
can receive a $500 start-up payment - plus an additional $100 a year until
your child turns 15 years of age (as long as you continue to receive the
National Child Benefit Supplement). That means that, over time, the CLB
program could provide up to $2,000 for your child's education, not including
the interest that can be earned. The Alberta Government has also established
the Alberta Centennial Education Savings (ACES) Grant, which will provide
additional support to families and students living in Alberta.
    That means that a child who qualifies for the Canada Learning Bond
together with the support from the Canada Education Savings Grant could obtain
close to $10,000 in no-cost federal government support - not including the
interest that can be earned or the additional funds that will be provided by
the Alberta government if you are a resident of that province, are considered
eligible, and apply.
    So governments, recognizing the importance of post-secondary education
and training, are trying to help. But the most important thing is to start
your saving as early as possible. If you start saving early, it is usually
possible for Canadians to save considerably more than they might have
imagined. Consider the following examples.
    Suppose you start saving your change from the day your child is born, and
suppose you save a loonie and a toonie each day for 17 years. That would add
up to $1,095 a year. If you save that money in an RESP, you will also receive
at least $219 from the CESG (possibly more depending on your income) - that
is, $1,095 x 20% = $219. If those savings earn just 3% a year, at the end of
17 years you will have saved almost $30,000! And that does not include any
other funds you may get from the Canada Learning Bond or Alberta Centennial
Education Savings Grant.
    Let's consider another example. Suppose you decide to give up one $2
coffee a day from the time your child is born and put that money into your
child's RESP -a total of $730 a year. This would enable you to get a minimum
of $146 a year in CESG ($730 x 20% = $146) - and possibly more depending on
your income. If your savings earned just 3% interest, that would add up to
almost $20,000 in total savings over 17 years, again not taking into account
any money from the CLB or ACES.
    Therefore, savings do add up and, in some cases, to quite a lot. If you
would like to learn more and find out about other savings strategies, visit
the Building Futures Network web site at www.buildingfuturesnetwork.com. The
Canadian Foundation for Economic Education (CFEE), which is a non-profit,
non-partisan organization, created this site with funding from the Government
of Canada. No one will try to sell you anything at this site. Its only purpose
is to try to assist Canadians with their savings activities - and particularly
with saving for post-secondary education and training. The site provides
saving tips and a great deal of other helpful information along with links to
the Government of Canada's education savings incentives.
    The site also provides access to the Building Futures Planning Guide,
which is designed to help you plan for your children's post-secondary
education and training. You can either download and print the Guide or soon
you will be able to use the on-line, interactive version - which should be
available by the end of September. CFEE will also mail out copies upon
request. The Guide is available free of charge. The site also provides access
to the calculator developed by the Investor Education Fund that lets you plug
in all of your own numbers and estimates and provides you with information on
how much you will need to save each year to reach your savings target. We are
also happy to make free copies of the Planning Guide available if you happen
to be someone who works with parents and would like to make copies available
at workshops, school parent nights, or similar events. If you would like more
information, please call CFEE at 1-888-570-7610 or visit our website at
www.cfee.org where you will find an array of resources to help.
    There is no doubt that post-secondary education and training are very
important in helping a child to build a successful future. By tapping in to
the help available, starting early, and putting a savings plan in place, you
can do a great deal to help prepare for the future costs - and help your child
better prepare for the opportunities that lie ahead.

    
    By Gary Rabbior,
    President, Canadian Foundation for Economic Education
    (gr@aci.on.ca or mail@cfee.org)
    





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For further information: 110 Eglinton Avenue West, Suite 201, Toronto,
Ontario, M4R 1A3, Phone: (416) 968-2236, Fax: (416) 968-0488, Website:
www.cfee.org

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