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How to Keep Your Kids Safe from School Debt

September 16, 2020

A post-secondary education in Canada can be quite expensive, especially with tuition, textbooks, and living expenses. With all those things added up, the price tag for a four-year degree can be as high as $80,000. If you don’t want your kids to start out their lives enslaved by student debt, now’s the time to start planning! Our Monsters have gathered some popular ways to save for your child’s education:

 

RESP – The contributions you make to your child’s Registered Education Savings Plan grow tax-free. Since your child will have little or no income coming in as a student, withdrawals are often tax-free as well. The Government also partially matches your contributions with the Canada Education Savings Grant (CESG.) It is money that the Government adds to a RESP to help pay the costs of a child’s education up to a maximum amount of $7,200 per child. If you have a modest income, then you might also be eligible for the Canada Learning Bond, which is money that the Government adds to a RESP for children from low-income families. If your child decides to not go to school, you can transfer the money to a sibling or to your RRSP.

 

Non-registered savings – If you want more flexibility, then you can simply start your own education investment plan using GICs, bonds mutual funds, etc. This lets you contribute as much as you want and use it in any way you’d like. You can still get some tax relief by setting up an in-trust account so you can split income with the beneficiary, your child.

 

Soft support – This involves providing gifts in-kind, such as a rent-free place to live, free use of a car, sending regular grocery payments, etc. Providing funds for some living expenses can alleviate some financial stress from a student perspective.

 

Smart mortgage strategies – Your mortgage can also help fund your child’s education. You can free up money for your yearly RESP contribution by taking advantage of many mortgage lenders “skip a payment” feature. Another strategy is to do an equity take out to cover tuition fees and find an affordable mortgage rate with lower payments. Refinancing your existing mortgage can be one of the most effective ways to access the equity in your home and leverage it into a whole set of financial possibilities. For more tips and ideas on how to use your mortgage strategically, talk to us today!

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