‘It’s rough out there’

Navigating the financial landscape of higher education can be a daunting task, as exemplified by a recent Capital One Canada survey. The survey revealed that a significant majority of Canadian parents, 50%, are saving ahead for back-to-school expenses, which are often higher than anticipated. This financial burden is not limited to tuition, but also includes costs associated with extracurricular activities such as hockey, figure skating, and dance.

Becca Mintz, head of credit and data at Capital One Canada, highlights that many parents are leveraging Canada Education Savings Grants, which offer an extra 20% match on contributions up to $2,500 annually, for post-secondary education. This grant can accumulate to a lifetime maximum of $7,200 per child. Parents can contribute up to $50,000 per child over their lifetime, which could potentially grow to $200,000 if invested in a balanced fund with an average annual return of 8%.

However, the financial stress experienced by students is also a cause for concern. A TD survey found that nearly 80% of Manitoba students reported that financial stress negatively impacted their well-being and academic performance. Joe Moghaizel, vice-president of everyday advice journey at TD, points out that even students with covered tuition may still face challenges in paying for rent, groceries, transportation, and credit card debt payments.

To mitigate these costs, students are increasingly opting to remain at home for their post-secondary education. Additionally, a growing number of students are upskilling by taking ancillary courses in coding and artificial intelligence to enhance their employability. These students can utilize RESP funds to pay for these courses, provided they are enrolled in a post-secondary program or the courses are offered by an accredited provider.

Moreover, grandparents can contribute to RESP accounts to transfer wealth tax-efficiently. By contributing the entire $50,000 maximum in a lump sum, they can potentially see their contribution grow to $200,000 over 18 years if invested in a balanced fund. Alternatively, a strategy called the "Magic 14" involves contributing $14,000 upfront and continuing to contribute for the following years to earn the grant, effectively maximizing the $7,200 lifetime grant.