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Figure out what you want to get out of going back to school. For example, do you yearn for better job – with a better income – and need your MBA to get it? Or are you thinking of hitting the books for fun? Your answer will determine how much you should invest in your studies.
2. Part-time or full-time?
Ask yourself, How can I meet my goals? You may be able to earn that extra education through evening courses or studying part-time, which means you can keep your current job, or at least work part-time, and avoid taking out a loan.
3. Talk to your manager
Have a chat with your boss. Sara Kinnear, a senior tax and estate planner with the Investors Group in Winnipeg, says many organizations have programs that help employees upgrade their skills and education. Perks range from paying for a night course at a community college to financing that MBA if you agree to stay with the company for a certain period of time after you earn the degree.
4. Look at your budget
Take a close look at your expenses. There's usually some wiggle room that you can use to save money to finance your back-to-school dreams. That said, Kinnear reminds people that "it's a lot easier to live on mac n' cheese when you're 18 than when you're 40," so make sure you can stick to the things you've committed to cut back on if you're counting on that extra cash to get you through school.
5. Leverage your severance
Use a severance package to your advantage. If you've received a severance package, or think you could negotiate one, you can use that money to pay for your education. Most severance pay is fully taxable, says Kinnear, so find out if your employer has taken off any tax and how much you will owe before you hand over a large chunk of your severance to pay tuition fees. Also, talk to your employer and your financial advisor to see if it's possible – and to your advantage – to have your severance put into an RRSP.
6. Lifelong Learning Plan
Make the Lifelong Learning Plan work for you. Similar to the home purchase plan, you can use the federal government's lifelong learning plan to take money out of your RRSP – without paying a penalty – to help pay for your post-secondary studies.
"You can withdraw $10,000 a year from your RRSP up to a maximum of $20,000," says Kinnear. "Your partner can do the same for you, which is a total of $40,000." This money won't be working to build your retirement nest egg once you've withdrawn it, but hopefully this loss will be offset by that great paying job you'll nab once you graduate. Also, you'll eventually have to repay the money back to your RRSP. Find out when this kicks in and how long you'll have to pay it all back.
7. You don't have to be a kid to have an RESP
Start an RESP for yourself. You don't have to be a kid to have a registered education savings plan; anyone can start an RESP for themselves. Setting one up in your own name and making contributions is another way to fund your plans to go back to school. The catch: Adults don't get the government contributions that kids do.
8. Loans and scholarships
Check out the Canada Student Loans program. See what loans are available for you, what interest rate is being charged, and how fast you'll have to pay your loan back. Don't forget to look into scholarships for mature or lower-income students – there may be some free money there for you.
9. Home equity
Use the equity in your home. If you own a house or condo, Kinnear says you can talk your financial advisor about the pros and cons of taking out a home equity line of credit or a second mortgage. If you go this route, she says it's best to come up with a plan of how you'll pay back the money once you start working again.
10. Take advantage of tax credits
Put money into a tax-free savings account. Kinnear says you can invest up to $5,000 a year and then withdraw it and use it for books and courses.
When you do head back to school, save all your receipts for tuition and books and take advantage of tax credits that help cover the costs. "You can transfer up to $5,000 of your unused tax credits to your partner," adds Kinnear.
Check out how you can juggle the demands of home and parenting when you go back to school.