The Education Challenge

As a wealth strategist I am well known to challenge conventional thinking.

Today …. The RESP is on the hit list.

If you’re like most parents … you probably believe the RESP (Registered Education Savings Plan) is without a doubt an amazing savings vehicle to encourage Canadians to save for their children’s future.   The government gives you a 20% grant on your deposits and who wouldn’t like a 20% return?   It’s free money right?

However, the 20% grant is not unlimited.     The maximum grant is $7,200 and that’s if you deposit $2,500 for at least 15 years before your child reaches age 17. 

What is more important … your child will only be allowed to use the money they saved as long as they attend a university or college program that has been approved under the income tax act of Canada. Will $7,200 in matching grants 18 years from now be impactful in helping to fund your child’s education expenses?    Probably not. Young parents are very well aware of the cost of an education.    This is the generation who has amassed the greatest amount of student debt upon graduation than any other generation before them.    It is not unheard of for a graduate of a 4 year bachelors program to have over $50,000 of student debt along with that piece of paper.   They more than most realize the cost of an education may very well be out of reach for their kids.    And they want information, flexibility, and solutions to help them build a solid financial future for their children.

It is estimated that the full cost of a 4 year undergraduate degree from a Canadian University in 2033 could cost over $122,000.

So I am asking you to consider something.   If the cost of an education for a child born in 2015 will be $122,000 in 18 years, how relevant is $7,200 in government grants going to be?

Is there an alternative?

Yes.   I am glad you asked.

A children’s whole life plan can give you tax efficient education funding plus a whole lot more.

What if instead of contributing $2,500 to an RESP for 15 years, you funded a similar amount into a whole life policy.   The returns at age 18 will be similar … but with whole life it doesn’t stop there.  (Exact results will vary depending on interest rates or stock market returns in the RESP investments as well as the dividend yields of the whole life policy.)

A children’s whole life plan can be used for any program of study around the world … yes … even if they want to become a golf pro or NHL player.

It can be used for opportunities beyond the classroom, like starting a business or getting a professional license.

Children’s whole life plans continue to grow even after they go to school.   The funds can be used for a down payment on a home in their 30’s … or to fund retirement at an even later date.

Do you want your investments to serve only one purpose, or have the ability to serve a variety of different roles?

 

This strategy works for newborns, toddlers, kids, & teenagers.     And unlike children who become teenagers, whole life policies just get better with age.