Shortly after our daughter was born we opened up an RESP and began regular monthly contributions. We didn’t start with much, just $100 each month to go towards her post secondary education.
A few months later I changed careers and moved into the public sector, working at a University. I had to sit through an entire day of orientation with Human Resources to explain the different types of benefits that I would be eligible for. I’ll admit that I didn’t pay too much attention that day, but I did walk away with stacks of information that would come in handy later on.
Tuition Benefit for Dependents
I found out that one of the more generous perks of working at a University is that your children are entitled to a minimum 50% reduction in tuition fees. This benefit can be increased to a maximum of 100% tuition fee waiver, provided there are enough pooled funds to cover all of the students enrolled in this program.
Considering tuition fees make up the bulk of the costs to finance education at most schools, this is an extremely generous employee benefit. Current full time students (10 classes over 8 months) at our school pay $5,300 per year in tuition fees. Multiplied over 4 years of studies and that comes to $21,200.
Since my daughter is only two-years old, we need to factor in some inflation to those figures. At a conservative increase of 2 percent each year, by the time she turns 18, her tuition costs might look like this:
- Year 1 – $7,421
- Year 2 – $7,570
- Year 3 – $7,721
- Year 4 – $7,876
Total tuition costs = $30,588
Minimum 50% tuition reduction = $15,294
If you factor in the cost of books and supplies at $1250 per year, then we are looking at approximately $20,000 to send our daughter to University. This is assuming, of course, that she actually wants to go to school here and live at home.
So back to the RESP contributions that we’ve been making for the past 2 years. If we continue setting aside $1,200/year into an RESP, plus $240 from the Canada Education Savings Grant (CESG), and allowing for a conservative growth of 4%, by the time our daughter is 18 the RESP will be worth $38,000.
Knowing that we are eligible for this tuition benefit, should we make any adjustments to our RESP contributions? Are we saving too much?
I think it’s too early to tell. 16 years is a long time, who knows if I’ll still be working at the University, and even if I am, there may be changes made to the employee tuition benefit. The other consideration is if our daughter wants to attend University in another city. Shouldn’t we at least plan for that option?
Working at a University definitely has its advantages. Not only do I get to participate in a generous defined benefit plan, I also have a tremendous opportunity to send my child to post secondary for at least half the standard cost.
As a parent, I feel that it’s important to provide every opportunity for my child to succeed. We are fortunate enough to be eligible for a benefit like this, but does it mean that our daughter’s future plans have been pre-determined?
Readers, what do you think?
- Increase, decrease, or keep RESP contributions the same?
- When the time comes, would you ‘strongly encourage’ your child to attend the school with the tuition benefit?
- Any other suggestions?
Check out The RESP Book to understand how RESP accounts work and how to get one started, what kind of RESP account to set up and what kind of investments to buy.