Graduating high school can be a defining moment. It’s when you start shaping your own story and making choices about what comes next. If your decision includes school – college, university, or a specialized program – taking responsibility for your finances is one of the best decisions you can make!
Let’s talk about three sources of funds for Canadian students.
A Registered Education Savings Plan (RESP) is a special program to encourage saving for education after high school. Typically, a parent opens an RESP when a child is young to take advantage of tax savings and government education grants like the Canada Education Savings Grant (CESG), which matches 20% of every dollar contributed up to $500 per year per child, to a lifetime maximum of $7,200.
As a student who is ready to start post-secondary, having an RESP means access to money can be used to pay for course fees, tuition, books, and other education-related expenses for part-time or full-time studies. The process, i.e. forms to fill out, can differ slightly between RESP providers but here are the basic things to know:
- The person who opens the RESP can withdraw the contribution money once the student beneficiary is enrolled in a post-secondary education program. There is no tax to pay but a proof of enrolment into a post-secondary education program must be provided.
- The student beneficiary receives an Education Assistance Payment (EAP) from the RESP which is made up of the grant money and interest earned on contributions and grants while the plan was opened. EAPs are paid directly to the student and is taxable based on the student’s income for that tax year. Usually, that means there is little or no tax to pay.
- Speak to your RESP provider about the best combination of contribution withdrawals and EAP payments for you and your student. Some RESP providers have rules about how and when contribution withdrawals and EAP payments are made.
- The government has guidelines about how RESP money can be used and RESP providers are responsible for ensuring these guidelines are met:
- A full-time program is a minimum three consecutive weeks with at least 10 hours of work per week within Canada or at least three weeks long at a university outside Canada, or 13 weeks long at a college or other type of post-secondary school.
- A part-time program is at least three consecutive weeks with a minimum of 12 hours per month on courses in the program.
- The program must be offered by a ‘recognized institution’ which is defined in the Income Tax Act. The list of recognized institutions includes both Canadian and international schools, and can be found here.
- Within the first 13-weeks of school, the maximum EAP is $5,000. For part-time studies, the maximum EAP is $2,500 per 13 weeks of study.
Taking responsibility for your RESP
If you are fortunate to have an RESP in your name, speak with that person to find out when withdrawals will be made. You can take responsibility for your RESP by obtaining documents such as a verification of enrolment form or tuition receipt. Keep in mind that each RESP provider has different processes and deadlines for withdrawing money for school, so do some research to make sure you don’t lose the great benefits RESPs have to offer.
Other funding sources
In addition to savings, there are other ways to get involved in funding your education such as scholarships and bursaries. They are a great way to reduce your financial worries. If you plan to stay in school, you should definitely search for online resources, like ScholarshipsCanada.com, to find funding.
A scholarship is a financial award to recognize a student’s achievements. Although usually based on academics, scholarships can also be awarded for athletics, community service or association with a specific group or organization. Some scholarships, like entrance scholarships, are automatically awarded to students based on their grades. But there are a vast number of other scholarships available – all you have to do is apply. In fact, according to Chris Wilkens, Founder and CEO, ScholarshipsCanada.com, there are more than 85,000 awards worth $190 million available to students in Canada – and almost $3 million of scholarships do not receive any applicants or go unclaimed.
Bursaries are usually intended to help students who need financial assistance to pay for the cost of their education. They are available from the government, schools as well as private or non-profit organizations.
Paying your own way through school might mean taking a student loan from a bank or through the government Canada Student Loan Program. It’s a reality for many students and there are several resources to help you be smart about money including the financial aid office at your school. Keep in mind that you will be responsible for repaying your loan whether you finish your program or not, so take the time to read the fine print and don’t be afraid to ask questions.
Budgeting tips for students
Living on a budget starts to become a reality after high school and that’s a good thing! Whether you are taking a break from school to work or continuing on to school, paying for some of your living expenses is the first step to having a smart relationship with money.
There are many financial bloggers and apps to help students manage their money. Here are some two pretty common sense reminders to start with:
- Set a realistic spending budget to manage your living expenses. Consider both your day-to-day living costs as well how you like to spend your free time. Making a little room in your budget for a fun can actually make it easier to keep your spending on track.
- Look for ways to live within your budget: reduce your cell phone plan to what you need versus want; comparison shop for best deals; plan your meals according to what’s on sale at the grocery store; buy used; take advantages of student deals. A little savings here and there can add up!
Setting a longer term goal is also a good way to stay motived. For example, thinking about the financial rewards or the lifestyle choices you will be able to make once you’ve completed your post-secondary program might make a tight budget easier to bear. According to recent research by the Education Policy Research Initiative at the University of Ottawa, within the first eight years of graduating, college and university grads saw their salaries grow by 59% and 66% respectively.
What’s the bottom line? Taking responsibility for how your spend money is empowering! You’ll gain a lifelong skill while living on a student budget that you’ll benefit from for years to come.
Students send a clear message – an RESP makes a huge difference when they attend school.
Video credit: Knowledge First Financial Inc