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Making the dream of higher education possible for your child or grandchildren

Provided by Fidelity Investments

Whether you're a parent, grandparent, relative or close family friend, you want to see the young people in your life succeed. And what better way to provide them with a brighter future than through access to post-secondary education.

Alternatively, you may have set your sights on a post-secondary education for yourself. Recognizing the advantages that post-secondary education can bring, many adults are also considering returning to school.

It's no secret that the costs of post-secondary education are rising. Being able to enjoy its many benefits can often come down to affordability. By planning ahead, you can make the dream of higher education possible.

Benefit from your advisor's guidance

Like all financial goals, the best way to save for higher education is by working with your financial advisor. Your advisor can help you quantify your education-savings needs and sort through the various options to develop a plan that balances your education-savings goals with your other financial priorities.

Why get started now?

Putting off saving for education will always be tempting. After all, the time when money will be needed can seem like a long way off and there's always something else to spend the money on. But if you want to make saving for education more affordable, the best way is to start saving right away.

If you think you can't afford to save for your child's education, think again! Government programs alone can build a sizable education savings account over an 18-year time horizon.

Because an RESP is a tax-referred vehicle for education savings:

For every dollar contributed, the federal government adds 20 cents of Canada Education Grant or CESG (subject to annual and lifetime maximums).
Investment growth is tax-sheltered.
Withdrawals can be made in the student's name (and taxed at their marginal tax rate).
Eligible for Canada Learning Bond or CLB (could mean an additional $2,000), depending on income.

The dollars and sense

Our example starts by funding the RESP with the Universal Child Benefit or UCCB (for Canadian children under the age of 16, paid in installments of $100 per month per child).See how investing just the UCCB could give you a good head start.

Potential RESP savings over 18-years using government-only programs
	UCCB	CESG	Account balance by age 18 years
If you deposit the Universal Child Care Benefit (UCCB)	$7,200	$1,440	$24,569
Source: FMR LL.C. Assumes a consistent 7% per annum return on investment and full Universal Child Care Benefit (UCCB) of $100 per month for 72 months is invested. The GESG is calculated using 20% of the annual contribution into the RESP for six years.

Please Note: It should be noted that the figures are illustrative and provided as an example of the benefits available- its advisable to use current market conditions when recalculating any of the above examples.
The rising cost of education

As good as government programs are becoming, it's still wise to save towards a goal that will reflect realistic education costs in the future. According to Statistics Canada, university tuitions have gone up 33.7% from 2001 to 2006 (source Statcan.ca Sept 2006) . and if your child chooses a school away from home, you'll need to consider the cost of living expenses too.

The Need to Plan

The answer lies in taking education savings into account, as an important part of your overall financial plan.

To assist you in arriving at the right decision, Fidelity Investments have developed Saving for Education, an easy-to-understand guide that provides insight into the many issues related to financing a post-secondary education, and an overview of the various alternatives available. This includes:

Registered Education Savings Plans (RESPs)
Informal "in trust for" accounts
Formal trust accounts
Investment accounts
Pooled RESPs

LOWER OVERALL COSTS

The sooner you start setting money aside, the less you will have to save in total. That's because your money will have more time to benefit from compound growth.

For example, if you want to accumulate $50,000 by the time your newborn turns 18, starting right away means setting aside $131 per month for 18 years, assuming a 6% return compounded annually. But wait until he or she heads off to Grade 1 and you’d have to put away $240 each month for 12 years to achieve the same goal.

Source

Notice: Fiscal Agents Financial Services Group are not engaged in rendering tax, accounting or legal professional services or advice. The comments in this article are not intended, nor should they be relied upon, to replace specific professional advice. Before acting on material contained herein. Readers should seek advice that is appropriate to their personal circumstances from a professional advisor.

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