Calculators

Credit/Savings

How much do I need to save for college?

Saving for your children's education requires a long-term plan. And, like saving for retirement, the earlier you start your plan the better. Use this calculator to help develop or fine-tune your education savings plan.

Definitions

Age of children

The current age of your children. This calculator is based on your children beginning their college education at age 18. The difference between their current age and 18 is the number of years you have to save.

Annual tuition

The current estimated cost of one year of tuition and books. This amount should be per child and be specific to the school they may be interested in attending.

Room and board

The current estimated cost of one-year room and board. Like tuition and books, this amount should be per child and specific to the school they may be interested in attending. For the purposes of this calculator, all expenses are assumed to be due at the end of the year.

Education cost inflation

Projected percentage of the annual increase in appraisal fees.

Current amount

The total amount you currently have saved for your child's (or children's) education.

Monthly contributions

The dollar amount you plan to save per month toward your child's (or children's) education. All amounts are assumed to be added to your account at the beginning of the month.

Registered Education Savings Plan (RESP)

Check this box to calculate your savings with a Registered Education Savings Plan (RESP). There are two advantages to an RESP for your children. First, it entitles you to a subsidy equal to 20 per cent of the first $2,000 per year and per child. Secondly, the beneficiary is taxed on the investment income of the plan, which is usually below the parents' tax bracket.

The maximum grant is $400 per year per child, and the maximum contribution to an RESP is set at $4,000 per year, per child. Please note: Results provided by this calculator do not take taxes into account. If your child is 16 or older and no RESP has been signed on his or her behalf, he or she may not be eligible for the subsidy. This calculator assumes 1/12 of the annual RESP grant is devoted to your monthly savings, plus your usual contribution.

Contributions to an RESP are limited to a total of $42,000 per child, and the total subsidies paid to an RESP are themselves limited to $7,200 per child. The amount you receive does not reduce the limit of your RESP contributions.

Rate of return

This is the annually compounded rate of return you expect from your investments. This will also be the rate used if you end up with a negative balance, and need to borrow money to meet your goal. The actual rate of return is largely dependent on the type of investments you select. From January 1970 to December 2008, the average annual compounded rate of return for the S&P 500, including reinvestment of dividends, was approximately 9.7% (source: www.standardandpoors.com). During this period, the highest 12-month return was 61%, from June 1982 through June 1983. The lowest 12-month return was -39%, which happened twice, once from September 1973 to September 1974 and again from November 2007 to November 2008. Savings accounts at a bank may pay as little as 1% or less but carry significantly lower risk of loss of principal balances.

It is important to remember that these scenarios are hypothetical and that future rates of return can't be predicted with certainty and that investments that pay higher rates of return are generally subject to higher risk and volatility. The actual rate of return on investments can vary widely over time, especially for long-term investments. This includes the potential loss of principal on your investment. It is not possible to invest directly in an index and the compounded rate of return noted above does not reflect sales charges and other fees that funds and/or investment companies may charge.