Parents generally understand that college and university tuition fees have been rising continually through the years and they are projected to continue rising even more in the years to come. They are projected to surpass the $125,000 mark by 2037, according to Knowledge First Financial.
As a result, they embark on saving for college early, in a bid to secure their children’s future. On the other hand, there are some parents that put off saving for their children education and are get surprised when finding out the amount of money required to save when the children are already in their teenage years. College is just around the corner and they don’t have enough to cater for the tuition. With such little time left the pressure to come up with the large sum required has led many to rely on student loans and other exploitative forms of financial aid.
This is why it’s very important to start saving for your children’s’ education as early as possible and here are some tips that can help you accomplish just that.
- Use RESPs
Registered Education Savings Plans are effective for both long and short-term savings and they are the most popular form of saving leveraged by parents for their children’s education.
For one, all contributions to an RESP are tax-free, states Knowledge First Financial, one of Canada’s best and largest RESP providers according to many of the Knowledge First Financial reviews. No deductions are made on the money until it is withdrawn.
Secondly, RESPs are guaranteed up to $500 in federal government grants per year for a maximum of $7,200. No other educational savings account is eligible for such a financial boost. Even upon withdrawal, the grant received is also tax-free.
- Life Insurance
The jury is still out on using life insurance policies to cater for college tuition fees. Some parents have used life insurance successfully and recommend it while others consider it a bad idea.
If we were about to dig deeper, the life insurance benefits largely depend on a parent’s situation. If you already have an insurance policy in place, you can choose to channel some money from it to a college savings account or you can consider adopting a term insurance policy where you pay lower premiums and redirect the rest of the money to a college account. Before you make any decision it is advisable to speak with a financial advisor to determine what will be the best for you and your family.
Sometimes the solution to save more involves searching for private scholarships to help reduce the college burden. It doesn’t have to be a fully-paid scholarship either. You can search for many small scholarships e.g. $1000 or less. A handful of these can lower tuition costs significantly.
If you’re dedicated enough you can even slash the total costs by half. The easiest way to increase your success rate and acquire more scholarships is to dedicate a few hours each week to send scholarship applications. 5 hours a week, each week for at least 2 years will certainly net you big results.
- Prepaid Tuition Plans
One of the problems parents face when they need to save quickly over a short period of time is finding an investment that offers considerable returns. Most investments only yield an average of 1-2 percent. Prepaid tuition plans, however, promise to grow at much faster rates.
In fact, they grow at the rate that college fees rise at. Since college tuition has been proven to grow at a rate of between 4 and 6% each year, parents are guaranteed a much more attractive investment compared to the 1-2% some other investments offer. In some cases, parents even receive tax deductions as an incentive to save through these plans.
- Consider Getting 2 Extra Years
If you feel you started to save considerably late, you’ve tried the above options and you still feel you won’t be able to manage the fees then you can consider buying yourself more time.
This can be achieved by taking your child to a community college where he/she can study for at least 2 years while he commutes from home. After the 2 years, when you’re comfortable with your savings, you can make the shift to a more prestigious college institution. During this time, you would save a substantial amount of money due to the reduced tuition and no accommodation costs. You can even encourage the child to get a part-time job to help lower the costs even further.