Educational savings: The benefits of starting early

Thinking about the cost of your children's education can be a recipe for financial stress. On top of everyday household expenses, there’s a whole range of school fees that we tend to underestimate. That's why it's a good idea to start saving systematically as soon as possible. Because even a little can go a long way. Here are some pointers on how to get started.

If you're not prepared, the high cost of education can catch you off guard and throw off your household budget, especially once your child enters high school.

Desjardins financial planner Angela Iermieri* suggests you start saving for your child's education as soon as possible. That can be as simple as a basic savings account just for school expenses.

"Every little deposit counts. When you save regularly, it adds up. As you get used to putting money aside on a regular basis, it becomes second nature," she says.

If you have room, you could also contribute to your TFSA and grow your savings free from tax.

Iermieri suggests building school savings into your annual budget, scheduling automatic payments and even depositing certain types of income—such as Family Allowance (Quebec), the Canada child benefit (federal), and tax refunds—directly into your school savings account.

And as she points out, "If schools ends up costing less than expected, you can always use that money for something else."

If you do end up with surplus savings, you can put them to good use elsewhere or invest them in a registered education savings plan (RESP) for your child's post-secondary education.

Registered education savings plans are designed to help pay for post-secondary education. Their main selling point is government grants. These grants are calculated based on the amount of money you put into the plan and your net family income.

Plus, families with low incomes may even qualify for the Canada Learning Bond (CLB) without putting money of their own into an RESP.

Parents, grandparents, uncles and aunts ... Any adult who wants to help pay for a child's post-secondary education can open an RESP!

Down the road, doing so can help students avoid having to take out loans or work while they're in school.

You can open an RESP for a child as soon as they're born, provided that the child is a Canadian resident and has a social insurance number (SIN).

Government grants can be added until the child turns 17, as long as you've contributed (and not withdrawn) at least $2,000 by the time the child turned 15, or at least $100 per year over the past 4 years.

You can make up the government grants from past years when you invested little by investing more now.

In 2022–2023,*** Statistics Canada estimated the average annual tuition for undergrads in Quebec to be $4,409. On top of that, you've got to factor in the costs of housing, food, and other essentials.

You can use an online calculator to figure out how much you need to save for your child's post-secondary education.

RESPs are opened in a child's name, and they're the beneficiary. The adult who opens the RESP is called the subscriber, and they're the owner of the contributions. RESP contributions are non-taxable when they're withdrawn.

The government grants and the investment income in the account belong to the student and are tax-free until withdrawal. Once your child registers with a post-secondary institution (vocational school, CEGEP, university, specialized post-secondary school), you can withdraw educational assistance payments (EAPs) for the child's benefit.

The account can stay open for 35 years and, under certain conditions, you can transfer it to another beneficiary if your child decides not to continue their studies. No matter how you end up using them, RESPs are an excellent investment.

* Financial planner and mutual funds representative for Desjardins Financial Services Firm Inc.

** Lifetime maximum grant amount per beneficiary is $7,200 at the federal level and $3,600 for Quebec, subject also to an annual maximum.

*** Canadian students, tuition and additional compulsory fees, by level of study / Statistics Canada