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All of you new parents, you had better put away those celebratory cigars and start saving.

At a time when Canadians are grappling with high levels of credit card debt, soaring house prices and troubling pension trends, Moms and Dads need to add skyrocketing higher education costs to their financial to-worry-about list.

In 18 years, when a baby born today goes to university to start an undergraduate degree, the total cost of a four-year program for a student living away from home will be $137,013, according to calculations from Toronto-Dominion Bank Financial Group. The bill for students still bunking with their parents will be a slightly-less-shocking $101,426.

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TD deputy chief economist Craig Alexander, who crunched the numbers, said the inflation-adjusted projections are not meant to scare parents. "From a financial planning point of view, the message is that there is a big expenditure facing them down the road. There are a lot of hard decisions that will need to be taken around this subject but ultimately, it needs to be factored into a financial plan."

Although a university degree has a huge cost, the potential payoff in terms of life-long earnings and job opportunities make it a phenomenally good investment, Mr. Alexander said.

Sara Kinnear, a tax and financial planning expert with Investors Group in Winnipeg, says families planning for their children's future should eliminate unnecessary spending and establish a budget.

"There is a limited amount of dollars in a family so it is a matter of establishing priorities," she said. "You might not be in a position to entirely fund your child's education, but you can give them some help."

The best financial savings tool for parents is a registered education savings plan (RESP). Until their children are 17, parents can stash up to $2,500 a year into the tax-sheltered vehicle, a contribution the federal government matches with a 20-per-cent grant - or up to $500 per child a year - with a lifetime maximum of $7,200. (Lower-income families can get as much as 40 per cent in grant money if they contribute less than $500 a year to an RESP.) The money in the RESP can then be invested, which will hopefully increase the amount parents will have available to pay for postsecondary schooling.

Parents who have maxed out their RESP limit can also put up to $5,000 a year for their child's education into a tax free savings account. Unlike an RESP, they will not pay any tax on withdrawals.

The problem is that not all parents have $2,500 a year to put into an RESP, much less the $5,000 for a TFSA.

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Caroline Nalbantoglu, a financial planner with PWL Advisors Inc. in Montreal, says her advice to parents who can not afford both is to save for retirement. "You get a tax deduction from your RRSP, so you get more bang for your buck. But with the RESP, aside from the 20-per-cent contribution from the government, you don't get any tax reduction."

Nevertheless, Ms. Nalbantoglu says higher education is a major financial goal for most of her clients, who would like to avoid seeing their kids saddled with large amounts of student debt. "That can really start them off on the wrong foot."

A majority of students are finishing school with debt burdens that make it difficult for them to buy a house, get a mortgage or pursue graduate studies, said Arati Sharma, national director the Canadian Alliance of Student Associations.

Robert McCullagh, a CFP with Calgary-based Benefit Planners Inc. and a financial planning instructor at Mount Royal University, said parents would be smart to start saving for education early, even if it is only a little each year. "To put side even a small amount will eventually become significant."

The TD study forecast that in 2027, students who leave home to start a four-year undergraduate university degree will need to pay $64,363 for tuition and other academic expenses (such as books and various academic fees) and $72,650 in living expenses for a total of $137,013. Students who live at home will face bills of $64,363 for tuition and academic expenses and $37,063 for living expenses for a total of $101,426.

TD based its 2027 forecast on an annual inflation-adjusted rate of 2.9 per cent for students living away from home and 3.5 per cent for students living at home over the next 18 years.

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By the numbers


Estimated cost in 2027

of a four-year university degree for a student living away from home.


That cost in 2009 dollars.


Estimated cost in 2027

of a four-year university degree for a student living at home.


That cost in 2009 dollars.



The 2006 census showed that individuals with a university degree had median earnings of $56,048, while those with just a high school diploma earned $37,403. Contributing to an RESP means you can get up to $500 a year (to a lifetime maximum of $7,200) to help fund your child's education

Saddling a child with a high education debt load can set them back as they try to buy a home or pursue a graduate degree. The average undergraduate finishing a four-year degree has a debt load of around $25,000.

Asking grandparents to give RESP cash instead of toys can help boost an education fund.

Putting aside a small amount can help offset education costs.

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About the Author
Personal Finance Web Editor

Roma Luciw is the Globe and Mail’s personal finance editor. She has worked at the Globe as a business journalist since 2001, covering stock markets, breaking news, and most recently anything that helps regular Canadians manage their own money. More

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