How much will it cost for Little Bun to go to university? Talking about the Registered Education Savings Plan (RESP)
I have been doing a little thinking about what it will cost in the future for Little Bun to go to university.
I started saving the year he was born
I started saving the year he was born, maxing out the RESP (Registered Education Savings Plan) at $2500/year to get the CESG (Canada Education Savings Grant) of 20% as a boost or $500/year (capped) with a maximum lifetime limit of $7200 given in grant money.
I only use the money the government gives us for him, we don’t contribute to this, or any gifts from friends/family. It’s his money, not ours – we’d never have that money at all if it weren’t for him.
We do however, pay any applicable taxes on this ‘income’ for him on his behalf.
He has $32,482.15 saved at 6 years old
We have 12 years to go, more or less in two places: RESP & cash
1. $23,266.67 in RESP invested at Questrade
$2500/year for 6 years + 20% government match) means:
- we contributed $15,000
- the government has given us $3000
Total = $18,000 contributed so far and $5266.67 is growth
2. $9115.48 in Cash
This is money in waiting, in a high-interest savings account for next year’s contribution of $2500.
I just save all the money we get from the government, I track it on the side, and then keep a running balance of his money.
How much will he possibly need at the end?
So I started thinking about the end goal, a projected cost of what it would mean for a 4-year degree at university.
BEST CASE SCENARIO: $67,420
We are already halfway to this goal, so I think this will be easily covered by the time he is 18, considering he has this much saved at 6.
- He goes to a university in Montréal – education is subsidized only in Québec
- He lives at home – Food & Board will be free
- He can take any 4-year degree he wants (I took the most expensive one in all scenarios)
Any extra cash will be kept as cash, and he can use it towards buying a used car, maxing out his RRSP (I will encourage this one very strongly instead as we are close to public transit), or later on, his TFSA when he turns 18.
IN BETWEEN CASE SCENARIO: $218,384.86
I didn’t map this above, but this would be if he went to a university in Toronto instead.
It would be the Best Case Scenario expenses plus the following additions:
- + Extra Tuition: $48,309 – We would lose the subsidized Québec education
- + Room & Board*: $32,277.60 – $500/month
- + Food**: $32,277.60 – $500/month
- + Transportation: $5823 – Toronto public transportation passes are triple the cost of Montréal’s and there is no car in any of these scenarios unless his grandparents let him us theirs up to their discretion
*Room + Board: I don’t know what would be reasonable at that point. I said $500 because that’s what I’d pay now for him to go and stay at his grandparents as it would cover electricity, gas, water, wear & tear, gas bills for filling up the car, etc. Maybe they won’t even accept any money, and he will just do all the work in the house, drive them around, etc.
**Food: I am sure a university student would eat a LOT MORE than a pair of seniors. He will have to definitely buy his own food, or give this money to them to help contribute to all the food he will intake.
WORST CASE SCENARIO: $231,295.90
This isn’t too far off from the In-Between Case scenario, because I am putting in $1000/month there for Housing & Food.
The difference is for this Worst Case scenario, I put $1200 for rent (in today’s dollars, extrapolated to 2023 inflated numbers), and kept food at $500, so basically adding another $700 a month expense for this.
DETAILED NOTES ON EACH CATEGORY
Note: I am talking in 2020 dollars but all the calculations were done with adding 34.49% inflation to account for 2032 dollars.
We are fortunate to enjoy subsidized education here in Québec along with having one of the best universities in Canada on our doorstep (McGill).
I took the highest-cost degree possible which seems to be engineering, at around $5200/year here but $14,180 in Toronto for the “same” undergraduate degree (obviously not the same).
If he goes out of province, he will not longer get the benefit of subsidized education here in Québec, and tuition WILL go up. I am not sure it will rise to $14,180 a year, but I put the most conservative number possible.
The cheapest tuition is a Bachelor of Arts degree (not generally including Commerce or Computer Science but degrees like History, Music, Art, Kinesiology, etc), and here it would be $4768.79 a year in Québec, but $6100 in Toronto.
The difference will be there, but maybe not as stark in other degrees, versus Engineering which has a very competitive pool of students for the same program in Toronto hence almost triple the cost there.
I did not account for any special education degrees he might take, such as maybe going for another degree but the tuition will be $30K a year (???).
Housing + Food
If he stays in Montréal, he can live and eat for pretty much free with us.
In Toronto, his housing costs would definitely drop down as he could stay with his grandparents but we’d likely pay for his room & board at his grandparents, and/or he’d have to also work it off his tab by helping them do A HECK OF A LOT OF CHORES.
He would definitely need to account for a food cost in Toronto, as I am sure a growing university boy will out-eat two seniors.
(In Montréal it wouldn’t be a free ride either in terms of chores, but we wouldn’t ask for rent or food money so we’re still paying for him but directly.)
If he decides to pick a university outside of either city, that slams on an extra $100K, more or less.
Textbook + Supplies
I put $1000 a year for textbooks and $1200 for supplies like.. .I don’t know. Pencils, erasers, binders, paper, whatever else he may need. He doesn’t need to use all of the money but it is there at least just in case he needs it.
I don’t know what other disciplines might need as extra supplies. I know some, add on not just textbooks but course material and other supplementary guides.
Laptop & Other
I split out the cost of a new laptop and other electronics over 4 years at $575/year. I don’t know if this is realistic. It probably is.
Very likely, we would give him an old laptop of ours to use along with hard drives, USB keys, and all sorts of things. We tend to buy new laptops every 10 years because they just get so outdated and won’t run the latest software which drives me insane.
We may not even need this cost, but just in case!
I’m putting a bus pass here. In Montréal today, it is under $60. In Toronto it is close to $150. This would definitely be an extra expense if he moved there.
There is no used car in these scenarios. That’s not something I am budgeting for as if he is in a city for university, there is going to be a transit line because he won’t be the only student without a car.
Option #2: He bikes but I’m also not budgeting a bike in here.
He will likely need a phone, with a small data plan.
This is just how it will go. I didn’t have one for years when I was younger, but he will need one to stay in touch because he sure as heck is not going to get a landline.
Grooming, clothes, medication, etc.
He’ll obviously want to go out and have fun, so… yeah. I need to budget for that. Or rather, I can budget for it now, and as he gets older, he’ll take over the estimates and decide on his own.
WHAT HE WILL HAVE TO DO
NONE OF THIS, is our financial responsibility.
Let me be clear that we are not adding our own extra money to this to help him. This is ALL ON HIM TO TAKE OWNERSHIP.
He will understand that this is his financial responsibility. We are starting him off right by saving his government “baby” money and investing it so he has a nest egg to use for education, but we are in no way shape or form, taking on any kind of debt for him.
He has to take on ownership. I have seen many of my classmates, with their rides fully paid, not take any of this seriously. They all graduated of course, but they didn’t really need to fight for anything or work hard, and just went off to jobs in their family’s companies, or with connections.
We don’t have any of this to offer him so he can’t be lazy and I think having to pay and think about it, will make him more conscious about what he is taking on as a future debt to then clear on his own.
He will learn how to budget & take financial reins
So obviously before all of this happens, once he gets his first part-time job, he will learn what income, expenses, taxes, and all this other stuff costs.
He will read lots of personal finance/money books that I will give him to start to change his mindset to be a rich and conscious one.
I also plan on having him take over his own RESP management as he gets older (under supervision), and as he gets his first job, he will learn everything about money including WHY he should max out his RRSP & TFSA.
He will not make the same mistakes I did, and not have a fully armed knowledge on money before attending university. I could have saved a lot of headaches and stress had I known all of this beforehand, but sometimes you need a role model / mentor to help guide you along.
Apply for all bursaries, grants and scholarships
With all of the above, he will be working hard to earn scholarships and grants to decrease his tuition costs with them because he will understand what these scholarships mean for his future student debt.
Stay in Montréal or Toronto
Out of that, if he decides he desperately needs to go to an expensive province like British Columbia, he will have to do the math and figure out how much more he will need/what he will do to make it there.
I won’t be forcing him to go to any university he doesn’t want to go to, but I will strongly advocate for staying in Montréal because this is not France, and your degree doesn’t determine your entire life and career.
I am definitely not factoring in him going abroad for school, let’s just say that.
ON MAXING OUT THE RESP EACH YEAR AT $2500
- Maximum lifetime cap: $7200
- Maximum yearly cap: $500 (20%, ergo $2500 is the amount to contribute yearly)
Based on this chart alone, we are on track (more than on track) RESP-wise.
He has $23,266.67 in his RESP, and at age 6, he should be at $18,900 and he is over that by $5266.67.
If we keep going at this pace, he will have enough for the Best Case Scenario, and graduate debt-free.
Otherwise, to hit the Worst Case Scenario, to save up $231,395.90 he will need to start saving $15,300 next year, fully invested. O_o
As this is not going to happen, he will definitely have to supplement with scholarships, bursaries and grants and/or take on student debt to make it happen out of province.