Have The Government Fund Your Child’s Future Education

October 27, 2021

This post is presented by Financial Advisor, Michelle Levesque

Every parent wants a bright future for their child. Currently a four year university education without residence in Canada is on average $50,000+, and with inflation that will grow. I have seen student loan repayments as high as a mortgage payment. For those of you who were lucky enough to have education savings set up by your parents, I’m sure you see the great value in completing your education and being able to focus on getting ahead, rather than large payments looming over you.

By setting aside an affordable amount on a monthly basis you can alleviate this stress for your child. Most parents set aside a small portion of their Canada Child Benefit funding monthly. This way you are taking some government funding and getting more free government funding over the long term so the government is essentially funding your child’s future education!

If you are currently expecting, the Canada Child Benefit calculator will give you an estimate of how much government funding you will receive monthly once you have your baby.

Every dollar up to $2500 yearly that you contribute to a Registered Education Savings Plan (RESP) the government will match with the Canada Education Savings Grant (CESG). You may also qualify for the Canada Learning Bond (CLB) depending on your total annual after tax family income.

Canada Education Savings Grant based on after tax family income

High income- 20% match on up to $2500 of yearly contributions
Middle income- 30% match on first $500 yearly, 20% on next $2000
Low income- 40% match on first $500 yearly, 20% on next $2000

The Canada Learning Bond is available to families with a lower income. You will get $500 into an RESP the first year, $100 each year after until your child is age 15…totaling $2000 of CLB.

When I run calculations for people saving the minimum required ($25 monthly) who are getting the maximum funding they will contribute about $5000 over the lifetime of the plan. But it should be worth closer to $15,000 in the end based on government funding and growth. So triple your original savings! That is huge! Definitely something to take advantage of.

You can contribute into the plan until your child is 17. At age 17 the government stops their matching. Most plans can be in effect for 35 years after they are set up. So there is plenty of time to just let it sit and grow until your child decides how they want to use it. Most plans can be used for any accredited institution.

If your child gets scholarships or their tuition is covered they can still use the funds for a car, books, living expenses; whatever they need it for…again they just have to show they are registered.

If your child does not go to University or College

Switch the name on the plan to another child to benefit from the funds.
Accumulated Income Payment-take all your contributions with the growth out. Government grants are sent back as they are for educational purposes only.
Roll into your RRSP-grow longer for you for retirement.

Plan Options

You can get plans through banks, life insurance companies, or scholarship companies. All these companies differ in how they invest your money. Some have risk so you can possibly lose money if markets go negative. Others have 100% guarantees on your money so you don’t have to worry about losing. Some give big bonuses or matches a typical bank RESP doesn’t offer. I cannot stress enough how important it is to look at all your options when it comes to saving long term into an RESP.

Being a broker I can offer every education savings plan through all institutions. Using an unbiased approach I educate parents in great detail on their options so you can make a truly educated decision.

We also have to pay attention to fees. The more fees you pay out over the long term for an institution holding and managing your funds the less you will have for your child in the end. Some plans charge much lower ongoing fees than a typical bank plan and even return some fees at the end of the plan.

There are also plans to watch out for that are designed to be used for a four year university program. If your child goes to college or less than four years of university you may not be able to get your growth out of the plan which can be a large amount of money.

So make sure you look into ALL options and read all fine print on any plan you are considering.

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Until next time!

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I have been guiding individuals and business owners financially since 2008. I chose to represent Front Gate Financial Group, a local brokerage, which offers every bank and insurance company. I do not believe in being biased or product pushing for one particular company since all companies can have competitive products at any given time. I review each individual’s entire financial circumstance, educate, then shop the market for the best in all areas. You deal with one person you trust and know you have the best in all areas.

My favourite part of being a Financial Advisor is educating and empowering people financially. There’s nothing better than having a new client tell me they are no longer overwhelmed and confused by their finances and are excited by the game plan we have put in place to budget, pay down debts, protect their family, and reach their goal of retiring comfortably.

Over the years I have been asked to give financial education presentations at numerous groups and events including: Fredericton Area Women’s Business Network, International Women’s Day, Mom Talk NB, the Oromocto Chamber of Commerce, Fredericton Regional Family Resource Centre, Military Family Resource Centre, Wedding Shows, Facebook groups. I am currently the Financial Pro for Mom Talk NB providing monthly articles and live discussions.

I am married, have a little fur baby AND… recently welcomed our daughter to the world! I enjoy travelling with my husband, painting, scuba diving, snowboarding, yoga, and walking my pup. Quality time with family and friends is everything!

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