Polsinelli Financial Advisory Group: Back to School
Jason Polsinelli, senior wealth advisor at Polsinelli Financial Advisory Group, shares his expertise when it comes to saving for your child’s post-secondary education.
Jason Polsinelli of the Polsinelli Financial Advisory Group leads a premier financial planning, advisory and wealth management team at Scotia Wealth Management. He hopes to use his unrivalled experience and expertise in this industry to help you manage your financial needs.
Q. What does post-secondary education cost today?
A. It depends. For most students who end up choosing a Canadian college or university, tuition can range between $3,000 to $8,000 a year without books and supplies. With residency, you could add $12,000 to $20,000 a year. If they choose to study abroad, the sky’s the limit. A four-year undergrad university program with residency will typically cost $80,000 per child.
Q. How can students afford this?
A. Funding can come from various sources like grants and part-time jobs but for the most part students are funded by student debt and parents. Student debt can be a burden for many years to come and impact them financially after school has ended.
Q. Are there any solutions that parents and students can use to lower overall costs?
A. The only time-tested and most cost effective way is for parents to save well in advance. Although we can save in bank accounts, savings bonds, and use other savings methods, the best way is to open and use a Registered Education Savings Plan (RESP). Due to its tax-effective nature and help from grants, the RESP account can achieve financial goals for education nearly twice as fast as regular savings methods.
Q. What makes the RESP the best savings method?
A. RESP is a registered savings account like your RSP but is dedicated to saving toward education. The benefit is that every year parents or other subscribers save money for a child up to 17 years old, they can net a 20% grant from the government on the dollar amount contributed up to $2,500. That’s like receiving an additional $500 per year. And, if you miss a year, you will be allowed to contribute an additional $2,500 of catch-up room to a maximum of $5,000 in another given year to receive that 20% grant. If you can save $2,500 routinely each year to age 18 in an RESP with a 5% return rate, you can accumulate $86,654 toward your child’s post-secondary education.
Q. What happens if children don’t go to university or college?
A. An RESP account is allowed to remain open for 36 years, so if children decide to go back to school at a later date you can use the funds then. If you have another child, you are also able to transfer the RESP savings and grants to a child under 21 without restriction. However, if none of that happens, the grant will have to be returned to the government and your principle contributions will be returned to you without tax.
Q. Why are parents not taking advantage of this program?
A. We believe it has to do with awareness of the account. According to an IPSOS survey, nearly one-third of parents are not saving for their children’s education and nearly 60% have not taken advantage of the grants available in an RESP. For postsecondary education, this should be the number one savings tool.
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