Managed Money Reporter NewsletterEditors: Carl Spiess & Allan McGlade |
Issue 226 |
Special Report by Andrew McGoey - The Spiess McGlade Team RESP expert
Earlier this month, the Ontario government announced that the two-year tuition freeze set in 2004 is to be lifted, starting this fall. Under the announcement, universities will be permitted to increase tuition fees for under-graduate programs by up to 4.5% in the first year and 4% in each subsequent year. Post-graduate programs, such as law and medicine, will see increases capped at 8% in the first year and 4% thereafter.
This will translate into an increase of $100-$200 on average for under-graduate tuition fees. Tuition alone for an Arts degree currently costs approximately $4500/year. This could balloon to almost $5400/year by 2009 - almost a 16% increase in the next three years.
In its 2005 budget, the Ontario government made a significant investment in post-secondary education, $6.2 billion over the next five years. Almost a quarter of this investment ($1.5 Billion) has been directly earmarked for student aid. Yet criticism has been heard from several student organizations that higher tuition fees will erode the impact of new grants created through the Provincial government's plan.
The message the government is trying to send may not have sunk in amid angry protesting. They insist no qualified student will suffer undue financial hardship. The goal is to provide more assistance to students from low and middle-income families. The plan is to set a cap on the amount a student could owe OSAP each year at $7,000.
Regardless of how you analyze the pros and cons of this announcement, the reality is that planning is essential to ensure greater success in achieving this future goal. Let's examine some of the options currently available to Ontario students.
The Ontario Student Assistance Program is a key source of loans for students lacking funds for post-secondary education. While there is optimism that the recent tuition announcement will bring with it improvements in grants and government assistance programs, we will have to wait until the start of the 2007-2008 academic year to know for sure. In the meantime, eligibility and accessibility will continue to frustrate OSAP hopefuls. If you find out you don't qualify for an OSAP loan, your child may still qualify for one of the many grants offered through OSAP.
For a complete list of grants available through OSAP please visit the OSAP website.
It may also be helpful to contact registrar's office of your child's school to see what other grants or bursaries may be available directly through the university or college. U of T - Scarborough Campus had $700,000 in bursaries available in 2004/2005. Don't miss out! Be aware of application deadlines.
A listing of other Ontario University bursary opportunities can be found on the Ontario School Counsellors' Association website.
If you are counting on OSAP to help fund your child's education, be sure to understand the eligibility requirements for registration. This may reveal that other savings may be necessary to bridge the gaps. One of the easiest and most popular savings plans is the RESP account.
We feel that Registered Education Savings Plans (RESPs) are one of the best ways to take control of planning for post-secondary education. RESPs are registered with the government and enjoy tax-sheltered growth of investments just like your RRSP. Similar to your RRSP, RESPs have annual contribution limits ($4,000/year per child), however, contributions are not tax-deductible.
Instead, the Government will pay 20% to your account for the first $2,000 contributed each year ($400). The Canadian Education Savings Grant (CESG) is available to ALL individuals who are under the age of 17 (special requirements are in place for 16 and 17 year old children). It can be invested as you wish and withdrawn (along with any growth) to help pay for university or college.
For families with several children, we generally recommend opening a 'Family' plan (versus an 'Individual' plan). The family plan provides more flexibility upon withdrawals. A child receiving a scholarship or bursary may not need to draw as heavily upon the funds leaving more for another child who may attend post-secondary school away from home.
Just like retirement planning, having a plan for education savings in place today can significantly increase successfully achieving a future goal for your children.
For more information on RESPs, please contact our RESP specialist Andrew McGoey or visit our RESP web page.
This month, we recommend you take a look at "CI Perspective: A computer looks at Canada". This article reviews Canada's resource driven stock market, looks at overall value and prospects for the 23 major stock markets, and finds Canada ranks 21st (eg. 3rd least attractive), due to our already high stock prices. The case for investing outside Canada continues to grow. Read the full article at:
http://www.ci.com/perspective/
Mackenzie has announced that it will be closing the Mac Cundill Recovery Fund to new purchases, effective April 7, 2006. The decision was made to close the fund as it is in the best interest of the current investors to help ensure that the Fund continues to be managed under the unique recovery mandate. The fund has done very well, posting impressive returns (see link, below).
No new purchases or purchases to existing clients and/or automatic investment plans such as PACs will be allowed. Please contact us if you wish to make an investment in the fund prior to the closing.
To help with your income taxes, Mackenzie has published their 10th issue of their mutual fund and RSP tax guide. If you have questions about you fund distributions, average costs, gains and losses or RSP income you will find helpful information.
With Tax Time approaching again on April 30th, we couldn't help but chuckle (and cringe) at the recent Mercer Report parody of the "Hand in my pocket" commercial. See the "Hand In My Pocket Spoof Ad" at the CBC's site. (Carl's warning – this is not appropriate for all viewers, especially those who don't like how much they pay in taxes):
T. 416.863.RRSP (7777)
1.800.387.9273
F. 416.863.7479
E. carl_spiess@scotiamcleod.com
allan_mcglade@scotiamcleod.com
ScotiaMcLeod is a division of Scotia Capital Inc., member of CIPF.
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