3 Ways to Plan Your Child’s Education Savings
It’s the beginning of a new school year, and now is the time to consider your child’s education savings plan. Take some tips, and learn how to plan an education saving strategy that works for you.
Saving for School
With the cost of higher education rising each year, many families struggle to save enough to help their children get through school. Surveys show that the average family pays 30% of their children’s post-secondary costs. With some programs today costing $14,000 a year and more, that can be a big part of your savings. How do you plan for these costs? Here are three steps to get you started:
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1. Set Realistic Savings Goals
You’ll be more likely to save enough for your child’s education if you start with some clear goals. Here are some examples to help guide you:
• How old are your children now, and how long do you have to save?
• Are they likely to go on to further studies after high school, or do their interests and abilities point in a different direction?
• Will your children be going to university, college or a trade school? Will they live at home or away?
• Will you pay all of the cost, or will your children also help by getting jobs or taking out student loans?
• Will your children be able to get scholarships, grants, or financial aid?
• Can any other family members help out? If your children are young, you might not know all the answers, but you can change your plan as life changes.
2. Calculate How Much You Need to Save Each Year
Use this education savings calculator to help you estimate how much money you will need to put into an RESP account each year to cover your child(ren)’s education costs. Further considerations:
• Can you afford to save as much as you would like? If you have other savings goals, what are your top priorities?
• If your household budget is tight, can you change your spending habits so you can save more? If you can’t spend less, you will have to change your savings goals.
• Will you get any government grants for each child? Can you save enough to get the maximum amount?
Tip: Many experts agree you should not give up retirement savings to save money for a child’s education. There aren’t many places you can go to get money to live on after you retire, but there may be other ways to pay for your child’s education. For example, your child may get student loans or a part-time job while in school.
3. Choose Your Investment Strategy
Depending on your situation, you may choose to be more aggressive in the early years when you have more time to build up your savings. Then, as your child finishes high school, you may want to move your money into more conservative investments to make sure it’s there when you need it.
Your approach will depend on your goals, the time you have to save, and how comfortable you are with investment risk. Make sure you check your progress along the way and adjust your approach if needed.