Education Planning

Education Planning

Education Planning is a good way to help people realize their financial objectives for their children’s education. The cost of education changes every year and so do the expenses connected with education such as fees, books, supplies, living expenses, etc. A well structured education plan will assure necessary funds for the education of the children. The process of education planning goes through several stages:

Ø Establishing the educational objectives

Ø Collecting and analyzing the data

Ø Developing an education saving plan

Ø Implementing the education plan

Ø Monitoring the education plan

Establishing the educational objectives means that most parents want higher education for their children. In order to finance that education they need to start planning and gathering funds. Higher education is always connected with higher job opportunities, higher possibilities and a better life.

Collecting and analyzing the data is connected with considering the current family situation. There are many different sources of funding t education. The most commonly used ones are:

Ø Own or Family Resources

Ø Financing that should not be repaid

Ø Financing that should be repaid

Ø Other Financing

Most people use own and family resources to finance the education of their children.

Developing an education saving plan consists of a prompt consideration about the different sources that can be used to finance the children’s education. The investment strategy for educational funds may include RESPs. If the investment strategy is set up early it will allow parents to accumulate more money for their children’s education.

Implementing the education plan means to start applying the strategy that has been chosen. If RESPs will be used, the implementation of the plan requires regular payments to be put in RESPs.

Monitoring the educational plan means that the plan has to be reviewed on a regular basis It will allow the planner to modify the plan according to changes in the economic situation &/or objectives.

The Educational Planning Process is very important in the process of Income planning. Students are eligible for GST Tax Credit. According to the type of financing the education the student has to claim different types of incomes. In most cases students do not pay high income tax because of the tuitions and fees. If the student is not able to use all or part of the Tuition and Education Tax Credit he/she may transfer the remaining amount up to $5000 to a spouse, parents, or grandparents. If there is still an amount that can be used as a tax credit it can be forwarded to the next year.

The Government of Canada allows parents to start accumulating money for their children’s education in RESPs. This is a contract between a subscriber and a promoter in the name of a beneficiary. The subscriber can contribute funds up to $4000 per year in the name of the beneficiary that will be used for future educational purposes. The lifetime limit of RESPs is $42000. There are 3 different RESP Plans: Pooled, Individual and Family Plans.

Canada Education Saving Grants are amounts of money the Government contributes to the RESP that should be used as funds for educational purposes. CESGs has certain limits, they are 20% of the annual contributions made to the RESPs for beneficiaries up to age of 17. The maximum total amount of CESGs for an individual is $7200.

Education Savings Plans allows people to make the estimation on how much money they need to save every month or year in order to finance the education of their children in a future period. A well prepared education plan can help people realize their financial objectives for their children’s education. Start planning early assures that adequate funds are available when the children reach the post-secondary level.