Shortly after our son was born, my husband and I realized we had totally different views about how to finance his university education — my husband (the cold-hearted one) said he should pay his own way and I (the softie) wanted to start saving asap. Our opposite perspectives probably stem from how we financed our own university educations – he had to pay for it all himself and I had a lot more help from my folks (thanks Mum!).
Of course, back then it was a lot easier to pay your way through school (and for parents to chip in when needed). Tuition was a lot lower and there seemed to be more bursaries and grants available than there are now.
Today, it’s a different world — the cost of a university education has skyrocketed since we were in school. And it’s going to keep getting more expensive: some estimate that a four-year degree will cost upwards of $130,000 by the time our kids are ready to go.
My husband and I have since met halfway on the education savings question. We’ll end up paying for some of it – and our son (and now our daughter too) will have to pitch in the rest. Our approach to financing their post-secondary education will be based on three main things:
1. Free money
We’ve opened a registered education savings plan (RESP) to start saving for our kids’ education. It’s a special savings account that lets your savings grow tax-free. But the best thing about opening an RESP for your child is that it makes you eligible for the Canada Education Savings Grant (CESG). It matches 20% of your RESP contributions on an annual basis to a maximum lifetime grant of $7,200 per child. So, if you put in $500 in the first year, the government will give you an additional $100 in grant money. That makes it a no-brainer for us.
2. Setting expectations
Even if we could afford it, we have decided not to foot the entire bill for our kids’ education. We want them to contribute by working part-time and earning scholarships if possible. We will let them know this ahead of time so that they understand what is expected of them financially and how much they need to earn.
3. Yale’s out…unless, of course, they can get scholarships
Yes, an Ivy League school would be an incredible experience – but it’s one we can’t afford. We want our kids to be able to weigh both the financial and educational benefits and costs of choosing different schools. Will they live at home and go to school locally? Or will they move away? These choices impact how much their education will cost in the end – we want our kids to choose wisely.