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30 September 2015

How To Prepare For the University Education of our Children in Canada?

There's a list that I found in my Facebook wall, which states the Top 10 Most Expensive Colleges and Universities in Philippines.  I started browsing it and the top most expensive costs around US$9,435 or C$12,671 (P442,067) per year.

The chance of studying in these universities, when Mom & Dad is working with minimum wage is so thin.  Scholarship or having a student loan is possible though.  These were mostly built for elites.

I remembered the cost of my tuition was around PHP36,000 per year (C$1,000).  Luckily, my sister got me a scholarship plan when I was just 7 years old.  Although I had one, we still needed to pay PHP6,000 (C$200) for the miscellaneous fees, which was not covered by the scholarship plan.

You might think that it's a small amount of money, but for my sister, she worked really hard for that.

That's the reason why my monthly allowance was sacrificed.  Imagine having PHP500 (C$14) per month in your pocket.  It made me thrifty when it comes to food. Clothing and entertainment were not in the budget.

Honestly, writing this post made me realize how lucky we are as a family to be here in Canada.  Here's why...

Education in Canada
When we came here, we already had the idea that the government will give allowances for our children and their education is free, but we are not aware of the details behind it.

We enrolled our eldest son (10 years old) to a nearby school and submitted all the requirements. The school registrar encoded it to their system and that's it! He's enrolled already. No tests. No fuzz. No materials to buy as well. It's all FREE and provided by the school.

Since the education is free from Kindergarten till they reach Grade 12, it's also the time we need to save for their University education.

If you're living in a minimum wage, you and your spouse, this is possible with discipline and budgeting especially if your child/children is/are 10 years below. On the other hand, it can be difficult to those who have older kids. That means you have less TIME to save.

No worries, I'll teach you how to do it as we go further down.

What If We Don't Have Enough Time To Save?
Here in Ontario, the government will not leave our kids behind, they made sure that every kid can gain access to College.  They have an option for a student loan.  It is called the Ontario Student Assistance Program (OSAP). 

The program was mainly designed to give financial support to eligible students who don't have enough budget for College.  The program will pay the tuition fees, books, mandatory fees, living costs, and transportation.

In return, students will pay their OSAP debt to the government once they graduate and find their respective jobs.  It's a Study Now & Pay Later type of program.


Although it is helpful for students, they are bonded with DEBT once they graduate.  They have to pay the loaned amount 6 months after they cease to be a full-time student.

Based on my estimate, which I mentioned in my previous post, University Education in Toronto Canada, an Engineering degree student will pay a total estimate of C$80,000++ 6 months after graduation on the year 2023.  I made this computation to have a glimpse on my eldest son's tuition fee.

One of my friends told me that some students can't bear the burden of paying such amount, they ended up taking their own lives.  I hope it's not always the case and sure there are other reasons for such behavior.

What is RESP in Canada?
Most parents don't want their kids to be burdened by the DEBT from OSAP.  Although it's a great help for our special ones, but we want our kids to have a better future and debt free after graduation.

This way, they will earn money for themselves, save earlier for their future.  It is also advantageous for us parents, we will be complacent when that time comes.

A savings plan was designed by the government to help parents save for the post-secondary education of their kids.  This plan is called the Registered Education Savings Plan or RESP.

Parents can save a certain amount on the RESP every month and the Canadian Government will match-up an additional percentage amount on to it and some grants as well.   As it matures, it grows interest because it's invested.

This is how RESP works:
"
  1. A subscriber enters into an RESP contract with the promoter and names one or more beneficiaries under the plan.
  2. The subscriber makes contributions to the RESP. Government grants (if applicable) will be paid to the RESP. These grants can be the Canada Education Savings Grant (CESG)Canada Learning Bond (CLB), or any designated provincial education savings program.
  3. The promoter of the RESP administers all amounts paid into the RESP. As long as the income stays in the RESP, it is not taxable. The promoter also makes sure payments from the RESP are made according to the terms of the RESP.
  4. The promoter can return the subscriber's contributions tax-free.
  5. The promoter can make payments to the beneficiary to help finance his or her post-secondary education.
  6. The promoter can make accumulated income payments. Source: http://www.cra-arc.gc.ca

Where do I get the money for the RESP of my sons?
As promised, I'll teach you how to save and invest the money "I do not own" to my sons' RESP.

We received monthly allowances from the government that was covered by the CCTB and UCCB.  These were:

CCTB - Canada Child Tax Benefit
UCCB - Universal Child Care Benefit

The money that goes into our household were FREE from the government.  It will be used for our kids monthly expenses.  We can now save and invest in the RESP.

A quick summary...

Remember that the benefits were free money from the government. When I invest in the RESP, the government will again, add a percentage of it with some grants.

Isn't it great?  What do you think?


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Ben Alagnam - MeMovingToCanada