Money & Career

Finding money for school

Author: Canadian Living

Money & Career

Finding money for school

These days there's an element of sticker shock when you add up the costs of higher learning – a four-year degree for a student living away from home currently costs $77,000. For a child born this year, that will increase to $137,000 by 2027. How can families possibly come up with that kind of dough when they're already paying mortgages and saving for retirement? You've got five options: save, beg, borrow, steal and sweat, says Tim Cestnick, president of WaterStreet Family Wealth Counsel in Burlington, Ont., and author of Winning the Education Savings Game: RESPs and Other Strategies for Canadians (Prentice Hall Canada, 2002).

1. Saving. A registered education savings plan (RESP) is the single best investment you can make in your child's education, says Jamie Golombek, managing director of tax and estate planning for CIBC Private Wealth Management in Toronto. The government kicks in a 20 per cent Canada Education Savings Grant on annual contributions of up to $2,500 per child. That's $500 per year, or $7,200 over the life of the plan. Money grows tax-free and is taxed in the hands of the student (who is likely to be in a low tax bracket) when it's withdrawn. But RESPs have a lifetime maximum of $50,000, says Blair Carter, an investment adviser and financial planner with RBC Dominion Securities in Halifax; to save up to $5,000 more, go with a Tax-Free Savings Account.

2. Begging. Millions of dollars in scholarships are available each year. You can find this free money on websites such as scholarshipscanada.com. Your kid doesn't have to be a brainiac to score one – they're also given for athletic achievement, community service or even living in the right city. Cestnick tells students to check requirements out a few years in advance so they can make sure they qualify when it's time.

3. Borrowing. The federal government's Canada Student Loans Program provides money depending on a student's need and her family's financial situation. To see how much your child might be eligible for, see the Student Financial Assistance Estimator at canlearn.ca. You can also get a bank loan on your child's behalf, or your child can get a student line of credit at the bank (payments begin immediately and a cosigner is usually required).

4. Stealing. Parents can withdraw from their registered retirement savings plan or other investments, or take out a home equity loan. "This should be a last resort," says Cestnick.

5. Sweating. Students can also foot part of the bill themselves, either by working during the summer or having a part-time job during the school year.  


Anne Bokma writes frequently on financial issues. The mother of two daughters, ages 13 and 10, she has been faithfully socking away dough in their RESPs since they emerged from the womb.


This story was originally titled "Dollars for Sense" in the September 2010 issue.

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Finding money for school

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