Many parents believe that contributing $2,500 annually to their Registered Education Savings Plan (RESP) will cover their child's university costs. However, the reality is that the rising cost of tuition, housing, and living expenses often far exceeds this amount. This article explores the financial challenges faced by families saving for university and provides advice on how to invest aggressively to reach savings goals.
For many parents, savings for their kids’ education is a priority. But after years of saving, most find that they fall short of the amount needed to foot the entire bill. That’s because many parents believe that if they add $2,500 every year to their, they’ll be set. Reality sets in though as university approaches: there simply isn’t enough in the RESP .
And the costs are rising. Many universities have been struggling financially, especially after the federal government capped the number of international study permits earlier this year, resulting in lower revenue for schools. This suggests that at some point, tuition fees probably have to go up. Rent has also been rising,Parents who want to save enough to foot the entire bill have to do more than just dump $2,500 a year in to an RESP.
To earn a higher rate of return on your investments you need to invest more heavily in the stock market. Using this RESP, you can see if that you want to fund four years of university education in Ontario with your child living away from home, and if you contribute the $2,500 a year, which is the amount that will give you the maximum available Canada Education Savings Grant each year, you need to earn 9 per cent on your investments every year over 18 years.
that give you a lot of exposure to stocks is key. With a long investment time horizon – defined as 10 years or more – it’s okay to have 80 per cent or even 100 per cent of the money invested in the stock market. You’ll need to be able to stomach the volatility with this allocation, but taking a long-term view of investing will help.
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