It's Your Money  

Ways to help fund your children's post-secondary education

Saving for education

As a parent, providing the best possible future for your children is a top priority.

Education plays a vital role in shaping their opportunities, and saving for your child's post-secondary education is a commendable goal.

However, like any financial endeavour, there are potential risks and challenges that parents should be aware of when embarking on this journey. Let’s look at some of these challenges as well as potential strategies to navigate them effectively:

1. Rising education costs - One of the most significant challenges parents face is the continuously rising cost of post-secondary education. Tuition fees, textbooks, accommodation, and other expenses have been increasing faster than inflation over the years. As a result, the amount you save now may not cover the full cost of your child's education in the future.

Mitigation strategy: Start saving early and consider investing in Registered Education Savings Plans (RESPs). RESPs offer tax-deferred growth and access to government grants like the Canadian Education Savings Grant (CESG), providing a valuable boost to your savings.

2. Investment risks - When saving for long-term goals like education, investing is usually the preferred approach due to potential higher returns. However, investing involves inherent risks, and the value of investments can fluctuate, especially in the short term.

Mitigation strategy: Choose investment options that align with your risk tolerance and time horizon. As your child's education draws nearer, gradually shift your investments to more conservative options to protect against potential market downturns.

3. Changes in educational choices - Children's educational plans may change as they grow older. They might choose a different career path, attend an institution with higher tuition fees, or opt for a program in another city or country.

Mitigation strategy: Keep your investment options flexible. With RESPs, you can choose from various educational institutions and programs, giving your child the freedom to explore different options.

4. Incomplete savings - Life is unpredictable, and unforeseen financial challenges might impact your ability to save as planned. Job loss, medical emergencies, or other family obligations could hinder your savings efforts.

Mitigation strategy: Create a comprehensive financial plan that includes emergency savings and insurance coverage. This can provide a safety net in case of unexpected financial setbacks.

5. Impact on other financial goals - While saving for your child's education may feel essential, it's important not to neglect other financial goals, such as retirement savings or debt repayment. Over-prioritizing education savings at the expense of these goals could lead to financial strain in the long run.

Mitigation strategy: Strike a balance between different financial objectives. Work with a financial planner to develop a well-rounded plan that considers all aspects of your family's financial needs.

6. Over-dependence on student loans - Relying heavily on student loans to cover education costs can burden your child with substantial debt upon graduation. High student loan debt can impact their financial freedom and delay other life milestones like buying a home or starting a family.

Mitigation strategy: Encourage your child to apply for scholarships, grants, and bursaries to supplement their education savings. Encourage part-time work during studies to help offset expenses.

7. Impact of government policies - Government policies related to education funding and taxation can change over time. For example, alterations to RESP rules or grant programs could affect your savings strategy.

Mitigation strategy: Stay informed about updates in government policies and seek professional advice to adapt your savings plan accordingly.

Saving for your child's post-secondary education is a noble and forward-thinking goal. However, it's essential to understand and prepare for the potential risks and challenges that may arise along the way.

By starting early and being proactive, you can provide your child with a strong foundation for their educational journey. Remember, financial planning is a dynamic process though, and regularly updating and altering your plan can make a significant difference in achieving your family's long-term goals.

This article is written by or on behalf of an outsourced columnist and does not necessarily reflect the views of Castanet.

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About the Author

Brett Millard is vice-president and a member of the executive leadership team at FP Canada, the national professional body for the financial planning industry. A not-for-profit organization, FP Canada works in the public interest to foster better financial health for all Canadians by leading the advancement of professional financial planning in Canada. 

He has worked in the financial advice industry for more than 15 years and is designated as a chartered investment manager (CIM) and is a certified financial planner (CFP).

He has written a weekly financial planning column since 2012 and provides his readers with easy to understand explanations of the complex financial challenges they face in every stage of life. Enhancing the financial literacy of Canadian consumers is a top priority for Brett and his ongoing efforts as a finance writer focus on that initiative. 

Please let Brett know if you have any topics you’d like him to cover in future columns ,or if you’d like a referral to a qualified CFP professional in your area, by emailing him at [email protected].


The views expressed are strictly those of the author and not necessarily those of Castanet. Castanet does not warrant the contents.

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