If you’ve recently moved to Canada, there are probably many new things you’re learning about life here: our national love for donuts and coffee, how to make the best of dark, cold winters, and the great expanse of land and rugged wilderness we’re a part of.
And if you’ve moved here with children, you’ll also need to know about our education system. Like many other industrialized countries, the Canadian government provides a high quality, publicly funded education to all kids from Kindergarten through to grade 12 via taxpayer dollars. So as long as you’ve settled in a city or town with at least one school, chances are your kids will have access to elementary and high school education without (much) money leaving your pocket.
But education after grade 12 in Canada can get more costly. If you and your child are planning their future education in Canada, read on for some important factors to keep in mind and ideas for how to save up.
College and university in Canada
Admissions are generally determined by academic performance and grades, but sometimes also by sports and other special interest activities your child might excel in.
And although post-secondary institutions receive some government funding in Canada, students still pay tuition fees to attend their chosen program. These fees vary between each college and university, and the fees will be higher for out-of-province and international students.
It’s worth noting that eligible post-secondary institutions in Canada are not limited to just colleges and universities. Other institutions such as trade, vocational or technical schools, religious schools, distance learning programs, and correspondence courses can all be considered as post-secondary education.
The cost of education in Canada
Compared to countries like Sweden and Germany where post-secondary education is fully funded, attending college or university in Canada can seem expensive. However, with our publicly funded education system, tuition fees in Canada are subsidized by the government to some degree, making them somewhat more affordable for students and families overall.
According to Universities Canada, currently across the country tuition costs range anywhere from $3,000 to $8,000 per year for college or university, depending on the province or territory. The costs will of course be even higher if you have to factor in room and board for a college or university away from home.
And if your children are still young, you could be looking at major increases in tuition fees by the time they are ready to apply to post-secondary institutions. According to C.S.T. Consultants Inc., it is predicted that by 2036, the cost of post-secondary tuition in Canada could be as much as $84,000 over four years for a university degree, or $146,000 with room and board factored in.
There are many different public and private scholarships, bursaries and grants your child can apply for to help offset the costs of their post-secondary education in Canada. And while students can also apply to banks or the government for loans, graduating with large student loan debts can be a substantial financial burden for most young adults.
With these kinds of current and potential future costs of education in mind, the best strategy for parents in Canada is to begin saving for your child’s future education when they’re young. And the most efficient savings vehicle for post-secondary education is a Registered Education Savings Plan (RESP).
The foundation of an RESP is compounding. The earlier you start saving for your child’s education, the more your savings can benefit from the power of compounding. In a nutshell, the longer you save, the more money you may have in your RESP, and the more interest, dividends and capital gains you can accumulate on your investment.
In Canada, RESPs are registered with the Canada Revenue Agency (CRA), and although your contributions are not tax deductible, your contributions grow tax-free until your child or other beneficiary needs the funds. An RESP also gives you access to government grants, making it even easier to reach your savings goal.
For example, the Canadian government offers the Canada Education Savings Grant (CESG), which adds money to your RESP(s). CESG matches 20 percent of the first $2,500 you contribute to an RESP each year, to a lifetime maximum of $7,200 per child. Depending on your family income you might qualify for more CESG each year, and some provinces also offer their own grant incentive programs.
Parents, grandparents, friends and other relatives can also open and contribute to an RESP on behalf of a child or beneficiary, making it a very flexible and easy vehicle to proactively save money; however, you and your beneficiary must be residents of Canada with valid Social Insurance Numbers. The goal with any RESP is that when your child is ready to study, you’ll be ready to help them pay for it.
Ways to save for post-secondary education
In general, a good savings strategy to maximize government grants is to contribute about $208 per month or $2,500 per year into an RESP.
However, if you are not able to put that much aside each month per child, the good news is that you can open an RESP and contribute what you can to start growing your education savings tax-free.
And, there are many creative ways to cut back on spending in your family budget to make more room for savings every year, including:
- Do-It-Yourself holidays and birthday parties
- Grocery and back-to-school shopping
- Budget-friendly vacations
Ultimately, any amount you start saving today, in whatever way works best for your family, will make a difference in your child’s ability to afford college or university down the road.
Teaching your kids about education and savings
As part of your new life in Canada, understanding the cost of living here and how to spend and save wisely to reach your family’s goals can be a great learning moment for kids and adults alike.
There are many tools and resources for teaching young kids about money and preparing them for their future financial independence. It’s never too young to start, and never too late to catch up.
And, it’s worth noting that there is plenty of fun to be had exploring local college and university campuses across the country – a great way to get to know your new home and the many opportunities here for future education.