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Don Zadravec, left, and wife Mary, right, are trying to save for tuition for their four children.CHAD HIPOLITO/The Globe and Mail

With four kids to put through postsecondary school over the next decade, Don Zadravec and his wife Mary Stambulic have spent a lot of time thinking about how to pay for it.

Ever since their first child was born in 1995, followed by the second child two years later and a set of twins three years after that, the Victoria couple have socked away money in registered education savings plans (RESPs) and hired a financial planner to help keep them on track.

Their goal has been to put away about $40,000 a child, and hope for good returns on their investments. Mr. Zadravec realizes that might not be enough given the escalating costs of university tuition across Canada, which has grown more than threefold since the early 1990s.

It's an ongoing debate for parents: How much should they contribute to the cost of their children's postsecondary education? It's a particularly hot topic today as parents feel increasingly responsible for their kids' career paths, coupled with the difficulty many young people are having today finding jobs to help pay for school.

"I don't think you can expect a 17- or 18-year-old kid to step up to the plate and fully fund their education. I don't think it's realistic in today's economy that kids can do that," Mr. Zadravec said.

For parents with children entering university today, the cost of a four-year degree can run upwards of $60,000, including tuition, boarding, books and other fees. And those expenses are rising every year.

On average across Canada, undergraduate students paid $5,581 in tuition fees alone in 2012-13, a 5-per-cent increase from $5,313 a year earlier, according to Statistics Canada. That followed a 4.3-per-cent rise the year before. Compare that to inflation, which rose 1.3 per cent between July, 2011, and July, 2012.

Longer term, inflation has grown by an annual average of 1.9 per cent between 2002 and 2012, while tuition fees increased by an annual average of 4.2 per cent over the same period, Statscan says. That compares with the average after-tax income for two-parent families with children, which Statscan says increased at an annual average of 2.2 per cent between 2001 and 2011 (2012 not been released yet) while annual average tuition fees rose 3.7 per cent over that same period.

At the rate education costs are rising, parents having babies today can expect to pay well beyond $100,000 a child once they turn 18, including tuition, housing and other fees. That's just undergraduate fees, and doesn't include costs for kids who may wish to attend graduate or medical school.

It's enough to make any parent wonder why they had kids in the first place.

Mr. Zadravec and his wife see it a different way – as investment in their children. It's also one they expect the kids to contribute to.

"You don't want your kids to treat you like an ATM. You want them to have some skin in the game," Mr. Zadravec said. "Our approach is that we're prepared to give a helping hand, but we're not prepared to give a handout."

What Mr. Zadravec and his wife have also wanted to avoid is having their kids stuck with a mountain of student debt, particularly if they can't find well-paying jobs when they graduate. A recent Canadian Federation of Students survey shows postsecondary students graduate with an average student debt of $27,000.

"I'd rather help them at the front end as opposed to ending up in a bailout situation," Mr. Zadravec said.

A recent Bank of Montreal survey shows 83 per cent of Canadian parents expect to pay for their kid's postsecondary education, and 44 per cent expect their child to also pitch in.

Chris Buttigieg, senior manager at the BMO Wealth Institute and co-author of the study, said one of the key mistakes parents make is not saving early enough, which means they can lose out on compounding returns on their investments.

He cites the example of a parent who contributes $2,500 per year for 12 years, for a total of $30,000. Assuming a 5-per-cent return on investment each year, that money will grow to $55,992. That compares to a parent who saves $5,000 per year over six years – the same total of $30,000 – but would see a smaller return of $35,391, based on the same 5-per-cent annual return rate.

"The longer the time the investments are sitting there, the better," said Toronto-based financial planner Barbara Garbens. "It's tough to play catch-up."

Ms. Garbens also recommends parents take all of the birthday money and other funds kids may receive over the years and throw it into the education fund, along with any other unexpected windfalls, big or small.

Calgary-based couple Charlie and Marylou Gammans decided to take it a step further and bought a fourplex income property in the ski resort town of Fernie, B.C., in 1998, to help fund the future education of their children.

"There's a unit to sell for every child and hopefully something for a bit of retirement," Mr. Gammans said.

The Gammans have three kids, ages 18, 16 and 15. The first is planning to attend university this fall.

The plan isn't to sell any units right away. Instead, the Gammans plan to see how much of the schooling they can fund through their RESP and other savings. That's alongside contributions they expect each child to also make to his/her own education, just as long as it doesn't affect their studies.

"We would expect some degree of contribution through the summer and maybe some school year work, but not at the expense of grades," Mr. Gammans said.



The example

Parents have just had a child and plan to send her to the University of British Columbia at age 18, in 2031.

What it would cost

Tuition only:

$44,338 (cost based on 2013 tuition of $5,154, indexed at 4-per-cent increase each year over 18 years)

Tuition and housing:

$101,545 (cost based on 2013 room and board, indexed at 4-per-cent increase each year over 18 years)

What needs to be saved

Tuition only:

Based on a 6-per-cent annual return on investment, BMO's Chris Buttigieg said the parents in this case would have to save $20,758, or about $124 a month (in today's dollars).

Tuition and housing:

Based on a 6-per-cent annual return on investment, parents would need to save $47,481 or $283 a month ( in today's dollars).

Source: BMO Education Savings Calculator (example based on sending a child to UBC)

Editor's Note: An earlier online version of this article incorrectly said that an investment of $5,000 per month for six years, growing at 5 per cent a year, would result in $35,391. In fact, the calculation is based on an investment of $5,000 per year, not per month.

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