That is an immutable fact. If education were a commodity, it would be among the most valuable and more sought after. But sadly, it’s not uncommon to hear of instances where schools are offering students an education loan at predatory and sometimes exploitative terms.
This hurts the nation in the process — instead of fresh graduates being able to get on with their lives and to help contribute to the flow of the economy, they are bogged down by student debt, which often eats away at their earnings. While I don’t doubt that student loans were initially created with good intentions, that is no longer the case.
But we all know that we can’t simply do away with education. And despite its prohibitive price, it is still one of the best investments to make in order to build a brighter future for our children. So, how do you escape the trap that comes in the form of exploitative student loans? You take an alternate route, of course.
These are some alternate ways that you could fund your child’s education.
Life insurance allows parents or even grandparents to fund a child’s education when they are able to make use of the excess cash value of an insurance policy. The primary benefit of this approach is that the growth of the money within the policy will not be taxed, but this comes at the cost of losing control over the money put into the policy.
This legal agreement ensures that the money that is transferred from one person to another will be used for its intended purpose. This is one of the best ways to ensure that your child uses your money for education and not to buy a new Corvette or to take an expensive vacation. It’s important to be explicit with what you want to happen to your money.
Tax-Free Savings Account
A tax-free savings account does exactly what its name suggests. Unlike in a regular savings account, money can grow tax-free in a TFSA and the money can also be easily withdraw for later use. The downside to TFSAs is that there’s no guarantee that the money will be used for its intended purpose.
Finally, RESPs or registered education savings plans, have been around since 1998 and are also the most popular way for parents to save up for their child’s education. Money that is deposited into these accounts also grows tax-free and sometimes, the government may even give grants to the RESP. If you’re unsure with what method to go for, you’ll rarely ever go wrong with choosing an RESP.
The importance of education has given rise to exploitative practices, but that doesn’t necessarily mean that our children have to risk their earning potential in order to get a good education. In most cases, loans are not the answer and they should only be treated as a buffer for your existing funds. As always, may you find this information useful and may your child have a bright future ahead!