Finances

Sending children to university without paying a single dollar!

Yes, you read that right. We can pay for postsecondary education only by investing in government grants…

The Canadian Education Savings Grant (CEGS) and the Quebec incentive (IQEE) can improve government grants.

The proponents of the heated debate concerning postsecondary education should consider the existing education savings. They are very generous but perhaps not sufficiently understood and used.

Yes, university studies are expensive. Actually, Statistics Canada confirms that student debt is growing. From 1995 to 2005, the percentage of students with accumulated debts of more than $25,000 has risen from 17% to 27%. Without the help of their parents or grandparents, these students must find a side job, fend for themselves or give up, by lack of means.

Yet, it is fairly easy to build a fund of over $26,000 without investing a penny. With the Universal Child Care Benefit (UCCB), parents have the opportunity to redirect $100 per month for 6 years in an Education Savings Plan (RESP).

As with an RRSP, the money invested will grow free from tax. Then, for every dollar invested, the CESG - Canada Education Savings Grant will invest $0.20, while an extra $0.10 will come from the Québec Education Savings Incentive. Therefore, you will get a 30% subsidy for investing money that comes from a grant!

Financing education without paying a single dollar

PUGE

6 years X $100 $
per month

$7,200

Canada Education Savings Grant

20% bonus

$1,440

Quebec Education Savings Incentive

10% Learning Bond

 $720

RESP balance after 18 years*

$26,553

For poorer families, it is possible to receive additional funds from both provincial and federal governments. The new CLB (Canada Learning Bond) even provides $2,000 for low-income families.

Do not misunderstand me. It is not a very complex strategy that would be fit for a few exceptions only. All of this is accessible to ALL families. It only requires for parents to be interested and make a MINIMUM effort.

But do not try to hear what I am not saying. There are exceptions. People living in poverty or afflicted by diseases must use the universal provision to eat and heal. I am not talking about them.

Like you, I know many parents who retain all UCCB benefits in a separate savings account that will be given to their children when they turn 18.

A simple accumulation in a bank’s savings account without interest (in both senses) makes no sense! $7,200 paid during those 6 years will only be worth $7,200 in the end.

Also be advised that if your child does not attend post-secondary education, you can give him the accumulated amount (except for the CESG and QESI that shall be repaid to the government) for the project of his choice. Otherwise, you can transfer the money to your own RRSP or TFSA.

*Our example assumes a monthly payment of the universal provision for childcare in an eligible mutual fund with an average marginal product of 7% net in recent decades.

Fabien Major
Financial Security Advisor

Fabien Major has been involved in communications and media since 1984. In 1996, he specialized in finance and successfully completed investment funds and financial security tests. Since 1998, he participated in hundreds of hours of continuing education in various institutions such as HEC Montreal and New York Stock Exchange. In 2006, he studied Business Administration (MBA) with an international module in Shanghai, Beijing and X’ian. As an independent Advisor and Financial Communications Consultant, he works with several publications and Canadian media such as Transcontinental’s AffairesPlus. He has been managing investment portfolios for individuals and businesses since 1997. You can follow him on Twitter, Facebook and on his blog (in French)


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