Home' Trinidad and Tobago Guardian : July 19th 2015 Contents their retirement savings, those funds have
to be diverted or stopped completely to accom-
modate a child at school.
"It may be a situation where your expenses
peak during that period, but your income may
have peaked a long time ago. So you are under
strain. You can't accelerate contributions
because you have accelerated costs already as
a result of funding the child's education. So
you fall back to the default position, which is
to take a loan," said Williams, who added that
this presents its own complications should
the parents financial situation worsen.
Plan for inflation
The financial advisors said parents should
begin with the cost of the programme. If not
sure about what educational path your child
might pursue, Williams recommended making
an average between the highest and the lowest
priced programmes. He said this can be done
for local and foreign degrees. After averaging
the yearly cost of the programme, Williams
applies an annual "tuition inflation rate".
"In Trinidad, the average tuition inflation
rate is 10 per cent. In the US, the average
tuition inflation rate is seven per cent," he
Fletcher, meanwhile, assumes an inflation
rate of two per cent every year. When there
is more than one child, Williams said he repeats
this process for each child.
In the event that the parent starts accu-
mulating funds late, the advisors say there is
not much that can be done beyond trying to
maximise the return on savings or investments,
a challenge in today's environment.
"What you need to do is look at the invest-
ment product that will give you a better rate
of return because savings accounts in banks
are not giving anything, or are less than one
per cent. Parents should look for what is offer-
ing a better return to help grow that fund a
lot faster," said Fletcher.
Both men, who work for insurance com-
panies, suggested insurance products may be
one of the ways to resolve this.
"Savings accounts are not necessarily the
best thing, especially if you have regular access
to it. I would put it in insurance. I would not
put it in an investment because, I would need
to make sure that I was always there to pay
to always continue. That is what insurance
does. Therefore, if I run out of time, my chil-
dren would not run out of money."
JULY 19 • 2015 www.guardian.co.tt SUNDAY BUSINESS GUARDIAN
NEWS | SBG5
CANADA OFFERS REGISTERED
The Canadian government offers the
opportunity to access money for tertiary
education for those eligible thorough
Registered Education Savings Plan
Those eligible include children who are
Canadian residents. Parents/guardians
who are also Canadian residents can set
up or make contributions to an RESP.
(For information on who is a Canadian
resident please see http://www.cra-
eng.html) The RESP is a tax shelter,
which allows contributors, usually
parents or guardians, to place money
into a tax-deferred savings plan.
Financialpost.com says of RESP,
"Similar to other registered plans, the
RESP is in essence a wrapper in which
you can hold various eligible investment
products, such as mutual funds and even
individual stocks and bonds. The main
benefit of the RESP is the ability to have
all earnings (capital gains, dividends and
interest) on the investments inside the
RESP accumulate tax-free until
withdrawn. When the funds are paid out,
they are included in the student's income
but presumably the child will be in a low-
or zero-tax bracket, on account of the
various tax credits available to them that
little, if any, tax will ever be paid on the
earnings when withdrawn.
The money can then be used by
Canadian residents to pursue a tertiary
education at universities, colleges,
Through various grants, the Canadian
government also contributes to the
RESP. One of these is the Canada
Education Savings Grant, where the
government contributes up to $500 to
RESPs for a given year, up to a lifetime
contribution maximum of $50,000.
Contributions over this amount are
subject to taxation. Prior to 2007, the
Canadian government contributed 20 per
cent of the first $2,500 put into the
RESP every year.
The life span of RESP is 35, with the
beneficiary only being able to access it
until they are 35 years old.
As with other financial instruments, it
is suggested that parents/guardians
start contributions to an RESP as earlier
as possible to maximise the amount the
child is able to withdraw when ready for
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