Lifelong learning: investing in new skills for a new world
Change - that's the only constant in today's world. And it's why so many Canadians are changing the definition of education to include lifelong learning. For growing numbers of us, education is the only way to refresh existing skills, add new skills and stay competitive in a rapidly evolving work environment. Even recent graduates are finding it necessary to incorporate continued learning into their career plan and for many whose school days are farther in the past, it's becoming more apparent each day that continued career success and maintaining your lifestyle could hinge on a return to formal learning.
You want to do it, you may need to do it, and you know you have the capacity to do the work, but ...how will you cover the costs of your renewed education? Good question - because you'll not only be investing a great deal of time in your new learning, you'll also be investing a significant amount of money, as well. And, while it's true that employers will sometimes cover the cost of upgrading or retraining, that's usually the exception rather than the rule - so here are the most common ways to pay for your return to school.
Set up a Registered Education Savings Plan (RESP). In your own RESP, you can contribute up to a lifetime maximum of $50,000. Although contributions to RESPs are not tax deductible and as an adult beneficiary, you will not be eligible for the Canada Education Savings Grant (CES Grant)*, your RESP contributions will grow on a tax-deferred basis. Few other non-registered vehicles offer this advantage. Plus, when you withdraw the income to go back to school, you may be in a lower tax bracket so you'll pay less tax than if the income was earned outside the plan.
By the way, you can set up a number of RESPs for your family - one for each child, yourself and even your spouse - and the contribution limits apply separately to each individual. Additionally, if one of your children decides not to pursue higher education, you can usually change the beneficiary to another person - including yourself. But, be aware that all prior contributions made into the plan on behalf of your child will now be deemed to have been made on your behalf. This could result in the total contributions to your plans exceeding the lifetime contribution limits. You'll also have to return any CES Grant money that accumulated in the plan.
Save for your education using a Tax-Free Savings Account (TFSA). The TFSA is a great tool for reaching short-term objectives such as funding your education. While saving for post-secondary education through your own RESP in adulthood, you do not benefit from the CES Grant, which generally is the primary benefit of an RESP. For this reason, saving through your TFSA, either alone or combined with an RESP could potentially create tax-free growth, resulting in more savings and additional flexibility.
Use some of your RRSP savings. Through the Lifelong Learning Plan (LLP), you are allowed to withdraw from your RRSP amounts up to $10,000 a year to a total maximum of $20,000 to finance qualifying forms of training or education for you, your spouse or your common-law partner. You must repay your RRSP withdrawals over a ten-year period or the withdrawals become taxable.
Keep in mind that using RRSP savings could cost you big time down the road because you'll lose the significant advantage of the tax-deferred growth those savings would provide if left intact over that ten-year period.
Your other options may include obtaining a loan - although you'll want to do that while you're employed because without an income the loan might be difficult to obtain - or establishing a regular savings program in suitable non-registered investments, especially if your return to school is a few years off.
For more help in assessing your continuing education funding options, it's a good idea to talk with your Investors Group Consultant.
* Canada Education Savings Grant is sponsored by Human Resources and Social Development Canada.
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This article, written and published by Investors Group Financial Services Inc., is presented as a general source of information only and is not intended as a solicitation to buy or sell investments, nor is it intended to provide professional advice including, without limitation, investment, financial, legal, accounting or tax advice. For more information on this topic or on any other investment or financial matters, please contact your Investors Group Consultant.
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