As a parent or grandparent, you may be wondering about the surest and most efficient way to pay for your kids' or grandkids' postsecondary education. Given the significant cost, these matters require planning.
Here let's discuss some options.
First, it can be immensely helpful to establish a budget for your child's education, the cost of which will depend on the kind of program and where the school is located. In Canada, the cost of a four-year degree, including tuition, books, supplies, housing and other costs, averages about $96,000 if the child lives away from home. Once you've estimated the cost, you can start planning the funding.
Many grandparents are willing and able to help cover the cost of their grandchildrens' education, and this kind of transfer of assets can also help reduce future probate fees and taxes by reducing the value of the estate at the time of death. One way of distributing these assets is to set up a registered education savings plan (RESP) for your grandchildren.
If you have multiple grandchildren, you can set up the RESP as a family plan that names all of your grandkids as beneficiaries. That way, if one child chooses not to attend postsecondary school, the other kids can benefit from the available funds.
A common question among parents and grandparents is whether they should stop contributing to retirement savings in order to cover the cost of the kids' education. While every situation is different, it is likely best to prioritize your own retirement savings, as there are no government-guaranteed loans or scholarships to fund your retirement, but there are such resources for funding postsecondary education.
You can also think of it this way: using your retirement savings to fund your children's education won't help them much if they eventually have to support you in retirement.