How much do you need to save for your child’s education?

The cost of post-secondary education is on the rise. In the last decade (from 2013/14 to 2023/24), the average annual tuition fees for undergraduate degree programs in Canada rose approximately 23%, from an average of $5,767 to $7,076. It may not seem like a huge leap over the course of 10 years, but if your child is very young, it might be more than 15 years until they go to school – and it’s bound to be more costly at that point.

How much does a post-secondary education cost?

Statistics Canada reports that, for the 2023/2024 academic year, students in undergraduate degree-granting programs at public Canadian colleges and universities paid an average of $7,076 in tuition fees. 

Source: Statistics Canada. Table 37-10-0045-01  Canadian and international tuition fees by level of study (current dollars).

But university or college tuition is usually just part of the equation. Add in compulsory fees, books, housing, transportation, food and other living expenses, and the average annual bill for a year of full-time studies and living away from home can reach around $19,500, depending on location. Extrapolated over a four-year program, and that could mean total costs in the neighbourhood of $78,000.

How do I calculate the overall costs of post-secondary education?

Just like with any financial goal, it’s best to start with the end in mind. In this case, how much will it cost your kid(s) to complete a post-secondary education? The complete answer depends on several factors:

• Living arrangements: Will your child live at home with free room and board, or live on their own? In residence? Remember to factor in the cost of food, transportation and entertainment.
• Cost of tuition: Fees can vary significantly by institution and province (see the chart below) and program. Don’t forget about books or other equipment and technology your child may need for their studies.
• Duration of studies: Are you saving to support an undergraduate degree or certificate program, or are graduate studies also a possibility?
• Rate of inflation: This can affect tuition and other living costs in the years before they start studying – and increase the amount you need to save.

TIP: To help you calculate your child’s specific education costs and to help identify a specific savings goal, the Ontario Securities Commission provides an education cost calculator. Using your contribution amounts, estimated inflation rates and other factors, the calculator returns an approximate total education cost, so you can get a better idea of how much you’ll need to save.

What’s the best way to help me save for my child’s education?

Despite the high (and rising) costs of post-secondary education, nearly 60% of university students do not have registered education savings plan (RESP) savings to draw on. Half of all undergraduates have turned to student loans to pay for some or all of their education, and two-thirds of students count on a parent or guardian to help cover their educational expenses. The average student leaves school owing more than $23,000 for a four-year undergraduate program. That’s why it’s so important to understand the most effective and efficient ways to help save for post-secondary education.

There are several different ways to save for a child’s post-secondary education, including a tax-free savings account (TFSA), non-registered accounts, or a trust. But RESPs are the most popular type of education savings account, and for good reason. They have a generous contribution limit, allow your savings to grow tax-free within the plan and can qualify you for government grants.

What is an RESP?

A registered education savings plan (RESP) is an account registered with the federal government that provides lifetime government grants of up to $7,200 and Canadian Learning Bonds of up to $2,000 for eligible children. Funds contributed to an RESP (up to a lifetime maximum of $50,000 per child) are eligible to receive the Canadian Education Savings Grant (CESG) of 20% of the first $2,500 in annual contributions (up to $500 per year). This immediate 20% return is a great incentive to invest in an RESP for your child.

Other notable benefits of an RESP:

• Tax-free compounding – You don’t pay taxes on any earnings from your RESP investments until the funds are used for educational purposes.
• Flexible maturity options – In future years, you can use the RESP funds for your child's education, transfer them to another beneficiary (such as a sibling), or even roll them over to your RRSP or a spousal RRSP.
• RESP income payments are taxed in your child's hands – All income and grants are taxed in your child's hands when the funds are redeemed for their education, which usually means they will be taxed at a lower level than if taxed in your hands.

Learn more about investing in your child’s future education and the benefits of an RESP. Read more about how to get $7,200 in government grants working for you.