Knowledge May Be Priceless, but University Sure Isn’t

As we watch the next generation of Canadian leaders head back to their hallowed halls of post-secondary education this fall, many of us can’t help but to reminisce about our own days in pursuit of knowledge at college and university.  While the opportunities for broadening your horizons are still endless, the food still mostly mediocre, and the assignments still easy to procrastinate, one feature of the Canadian post-secondary world has radically changed: the cost.

While it is tempting to write off increasing school fees as mere “Millennial complaining” the facts don’t support this generalization.

How much does it cost to go to university, anyway?

Statistics Canada reports that average undergraduate tuition fees rose by 2.8% to over $6,373 for the 2016/2017 academic year, which outpaces overall inflation.  The reality is that even after you adjust for the average cost of living increases, university tuition fees have risen more than 40 per cent in the last decade.

Budget beyond tuition:  Additional expenses

This is to say nothing of the many add-on administration fees that don’t technically count as “tuition” but are nonetheless tacked on to students’ bills and need to be paid.  In fact, compulsory fees are on the rise and may be costing students more than they realize.

Based on information from Statistics Canada and university websites C.S.T. Consultants Inc. estimates that a 4-year university degree could cost as much as $157,000 by 2035.  That’s for a student living away from home, and includes tuition, compulsory fees, room and board, entertainment, transportation and books.

Am I saving enough for college or university?

Perhaps even more alarming than these sky-high numbers, are the findings of C.S.T. Consultants Inc.’s the BC Bridge the Gap campaign survey which suggests one-third of British Columbia’s parents are not saving for their child’s education.  Furthermore, only 7% of BC parents know that the provincial RESP grant is available, while 40% could not identify the correct tuition costs of a current undergraduate Bachelor of Arts Degree.

Help Is On the Way: An RESP

While helping your child with these increasing costs may seem like a daunting mountain to climb, the good news is that there is substantial help available, if you understand how to play your cards right when it comes to savings.  While rolling your loose change and throwing it in a basic savings account might have been enough to offset university costs a few decades ago, the current reality calls for a more planned approach.

 RESP Grant Rules

You may have heard of a Registered Education Savings Plan or RESP, but are you aware of the various types of “money” that the government is willing to throw at you?  There may be more funds than you realize!  Here’s a quick rundown of all the “money” up for grabs:

  • Canada Education Savings Grant (CESG): Federal Government will match 20% of your contribution to an RESP up to an annual maximum of $500 per child and a lifetime maximum of $7,200 per child.
  • Additional CESG: Federal Government will top up their CESG contribution by an extra 10-20% on the first $500 of your annual contributions if your annual adjusted family income is below a specific threshold ($91,831 in 2017).
  • Canada Learning Bond: An immediate $500 is all yours from the Federal Government if you meet low-income thresholds – just for opening an RESP account! Subsequent annual $100 grants are available until age 15 up to a lifetime maximum of $2,000 per child, if your income stays below the threshold.
  • British Columbia Training and Education Savings Grant (BCTESG): If you live in BC, the Provincial Government will send you a one-time RESP top-up of $1,200 if you apply for it from the time your child turns six years old until the day before your child turns nine.
  • Quebec Education Savings Incentive (QESI): Quebec residents will receive an additional 10% boost to whatever contributions they made to their RESP up to an annual per-child maximum of $250 and a lifetime maximum of $3,600. Low-income families can snag another $50 on top of the basic QESI grant.
  • Saskatchewan Advantage Grant for Education Savings (SAGES): Similar to the QESI program with a 10% additional top-up to a $250 annual maximum and $4,500 lifetime maximum per child. The Saskatchewan Government has announced the temporary suspension of this program effective January 1, 2018. You have until December 31, 2017 to make contributions to an RESP and be eligible for SAGES.

With so many incentives to start an RESP for children immediately, it’s amazing to note that it’s estimated that less than half of all young Canadians do not participate in a program offering parents money for their kids post-secondary education.  Despite the obvious added benefits to low-income families, a new federal study concludes that much of the “money” available through RESPs is going to households with annual household incomes above the $90,000 mark.  With such flexible investment options, adjustable family plans, and the ever-increasing importance of a post-secondary education in today’s job market, can you and your family really afford

not

to have an RESP?

Original article posted September 2016. Updated May 2017.

Kyle Prevost

Kyle is a teacher by day and personal finance blogger by night. When he isn't limping up and down a basketball court, you can catch him on his soapbox at Birtle Collegiate or providing the answers to Gen Y’s questions over at YoungandThrifty.ca and MyUniversityMoney.com. He is also the co-author of a critically-acclaimed book for Canadian students: More Money for Beer and Textbooks and has written for several of Canada's premier publications including the National Post, Globe and Mail, and Metro News.

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