Crowdfunding for good causes and business startups alike are widely recognized as a valid practice that is usually associated with a platform such as GoFundMe or Kickstarter. But if one is trying to raise money for a child’s future post-secondary education, such platforms are not necessarily the best solution. A novel idea for Canadians combines the registered education savings plan (RESP) and old-fashioned gift giving to create a homemade crowdfunding education campaign.
Post-secondary education expenses
As an encouraging article on crowdfunding your child’s education points out, post-secondary education is not cheap. Statistics Canada reveals that undergraduate tuition currently averages $6,571. In addition, there are all the costs of daily life as a student to consider as well.
Whether parents hope their children ultimately receive specialized training or a full university degree, post-secondary education expenses can easily go beyond what parents can save or students can earn. Turning to student loans to make up the difference can start a young person off with crippling debt, making those first years on their own difficult to manage. In such a situation, a parent or student might consider crowdfunding the child’s education using a platform like GoFundMe, which is designed to raise money for good causes.
But crowdfunding platforms are typically designed for short periods of fundraising that involve a wide range of people giving small to medium amounts to come up with large sums. Given that education is a widespread need and that few young people have broad fanbases on which they can depend or support, the now widely recognized approach to crowdfunding using an online platform is unlikely to be the best fit.
An alternate approach to crowdfunding
An alternate approach combines old-fashioned gift giving over an extended period and the use of Canada’s registered education saving plan or RESP. A RESP allows friends and family to pay into a fund to be used for the child’s future education with the giver paying taxes on the amount that year. Money is withdrawn tax-free except for taxes on any interest made in the interim.
A RESP allows for parents to start a friends and family crowdfunding campaign during infancy if desired and continue all the way into young adulthood with a financial vehicle that ensures that the money is used as intended. If plans change and the child does not pursue an education, then the promoters who administer the fund can return it to the subscriber, those giving the funds.
With a RESP in place, parents can focus on events in which gift giving naturally occurs, such as birthdays, and gather money to deposit in the RESP. In addition, establishing such a RESP, whether for an individual child or for all one’s children as a group, may encourage others to set up RESP’s of their own on behalf of an individual child so that they may freely give as desired. In such a case, be sure to keep tabs on contributions so that the giving does not go over current governmental limits.
Keep things in perspective
Be sure to consult official Canadian guidelines for RESP’s and stay current since such a crowdfunding approach is designed to span many governments. In addition, remember that kids like regular gifts too and try to find a balance between real celebration and educational savings as the years pass.