Saving for University?

We recently, sent our second of four children off to University and I thought I would share some insights about how you can pay for the ever increasing cost of University education for your children and grand children.

Depending on university, the program of study that they choose, if they will live in residence and when they will attend, these costs can exceed $20,000 to $30,000 per year to study in Canada. A four year degree could cost over $100,000.

RESP's and stock market returns have not performed well enough to offset the corresponding cost increases in post secondary education. For example, the TSX just recently returned to the 15,000 level. 

You could always teach at an institution of higher learning and hope that your children will avail themselves of the free tuition perquisites that you may have available to you. Unless, of course they do not cooperate with your plan and choose to go away to another university. 

Anyone who invested in the stock market in June 2008, is keenly aware that our investment lost 47% of its value by late November, 2008. The good news, if you remained in the market, is you finally recovered your investment in June, 2014. Ignoring risks, opportunity costs, inflation and the falling dollar, it has been quite a ride. 

And no, my broker didn't advise me to buy Apple or Netflix. 

Now imagine, you had invested $100,000 in the Greater Toronto real estate market during the same period and you purchased a $400,000 property. Today, that property would be worth over $560,000.  The property would have benefited from compound growth of 6% per year. Your return on the initial $100,000 would have been over 60%.  

There are other markets outside of the GTA that can provide you with an affordable opportunity to invest in real estate. The key objective is to find something that will provide you with 5% annual growth. 

Many smaller cities within driving distance of the GTA could help you achieve your investment goals. You should contact your realtor and ask them about these types of opportunities.

 

 

 

 

 

 

 

 

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Donald Lum

Donald Lum

Sales Representative
CENTURY 21 Leading Edge Realty Inc., Brokerage*
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