A post-secondary education is one important gift that we can give our children, but it is anything but free. A college or university education is a big ticket item that is increasingly beyond the reach of many families.

Education inflation
Just how expensive is it to put a child through college or university? (Make sure you’re sitting down.) Human Resources and Skills Development Canada (HRSDC) reports that a four-year degree – with living expenses factored in – now tops $61,800. In 18 years, HRSDC expects the same program will cost $87,600.

Paying for post-secondary education is a sacrifice. But families know that missing out on the opportunity could be an even bigger sacrifice for a child.

Two out of three new jobs require more than a high school diploma, according to Statistics Canada. University graduates earn on average twice as much as workers with only a high school diploma, and they’re more likely to hold on to a job when times are tough.

What is an RESP?
The federal government recognizes that families need help in giving their children opportunities to acquire skills through education. That’s why it has created a special savings plan with several attractive features.

A Registered Education Savings Plan is a special type of savings account. Contributions to an RESP are not tax deductible; however, capital gains and income earned on your contributions grow tax-deferred until withdrawn. You can set up either an individual plan or a family plan.

When the money eventually is withdrawn to pay for education expenses, the accumulated earnings will be taxed at the student’s typically low tax rate.

The federal government sweetens the deal with bonus payments from the Canada Education Savings Grant program. Grants are worth 20% of the first $2,500 in annual RESP contributions, up to a lifetime limit of $7,200 per child.

The provincial government has also stepped in with the Alberta Centennial Education Savings Plan Grant which provides for an initial $500 grant to go towards an RESP for every child born after January 1, 2005. This year they have further enhanced this program to offer a $100 grant for every child who has turned 8, 11 or 14 since January 1, 2005.

Depending on the flexibility of your particular RESP, you can hold cash and term deposits, and even invest in mutual funds or other securities for maximum growth potential. There is no foreign content limit.

Mutual funds are offered through Credential Asset Management Inc. Commissions, trailing commissions, management fees and expenses all may be associated with mutual fund investments. Please read the prospectus before investing. Unless otherwise stated, mutual fund securities and cash balances are not insured nor guaranteed, their values change frequently and past performance may not be repeated. ®Ethical Funds and TMThe Ethical Funds Company are registered marks and trademarks owned by Ethical Funds Inc. and are used under licence.

November 21, 2007