INVESTMENTS: RESP

Custom Education Savings Plans

Prepare Today for Your Children's Tomorrow

Give your children or grandchildren a gift that will pay dividends for the rest of their life: a custom education savings plan that, started now, can protect them later from double-digit annual increases in tuition costs. Post-secondary education is more crucial than ever - but it's getting harder to pay for it. The only good news? The younger your children are, the more they can benefit if you start now.

Putting Away Money Today Means Savings Tomorrow

You have three options:

The consequences of each option are striking.

Paying After

Student and personal loans can take some of the immediate sting out of the costs of higher education. But if your children are carrying loans, they'll graduate with hard-earned degrees and a huge debt load. And since financial aid for higher education has been cut in recent years, there's no guarantee student loans will be available when your children need them.

Paying During

Paying while your kids are at school means you spend your after-tax earnings to cover the costs.

Even if your kids work to help pay for their tuition, a part-time job probably won't pay for fees and living expenses.

Paying Before

Save today while your children are still learning their ABC's. You can shelter income for their education, just like in an RRSP. And if you want the money to grow in a way that protects your children from rising tuition fees, consider investing in equity mutual funds through a plan that defers taxes.

Pay Before, During, or After - You Choose

Tuition fees increased 159% in the 10 years following the 1987-88 academic year. People wonder what the cost will be for new parents with kids starting their post-secondary education in about 18 years.

No one can predict the actual cost with absolute accuracy. But we decided to take what we know now and apply it to the three options parents have for paying for thei kids' education.

The Cost of a Four-Year Program

Start Now:  If you invest $10,800 in an equity mutual fund earning an average annual compounding rate of return of 10%, you'll end up with enough to cover your child's education costs of almost $70,000. Or you can invest $100 monthly (starting at your child's birth) in the same mutual fund. When your child is 18, you will have put in $21,600, but your savings will have grown to almost cover the costs.

Pay During:  Pay while your child attends school and you'll spend about $70,000 in after-tax dollars in just four years.

Pay After:  Assuming the interest on your loan is 9% and you make an annual repayment of $7,500, it will take you 21 years to pay it back. The cost of your child's education just jumped to about $154,000.

Seeking Advice

Asset management can consume a considerable amount of time and energy. Today's complex financial marketplace and changing tax laws can make it even more difficult to keep up with the changes and how they affect you.

Because of these implications, it is highly advisable to seek a qualified professional to help you understand all the complexities involved.

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