When your child dreams of becoming a doctor, what was your initial reaction? Many parents will encourage such an ambition. After all, being a doctor is a noble profession. But in the back of your head, you know that education these days costs money, especially when one’s child aspires to be a healthcare professional. While medical schools do cost much, there are ways you can prepare for medical school tuition. The following are steps that will help you financially.
1. Get A Tax-Free Savings Account
Regular savings accounts incur interest rates, but if you want to save up for anything, such as the cost of medical school, you’d like to get a Tax-Free Savings Account (TFSA). It’s aptly named because your contributions aren’t tax-deductible. The program began in 2009 and is available to customers with a SIN or social insurance number for ages 18 years and older. TFSA can build wealth and can be used for anything such as education. Withdrawals are also not taxable, so it’ll be easier to save money. Both residents and non-residents with a SIN can open a TFSA. However, non-residents must pay a monthly 1%, so the contributions remain in the account.
2. Scholarship Application
A common way to afford education is to apply for scholarships. Your child can get a partial or complete ride to college once a scholarship has been granted to your child. They’re usually based on merit and typically come from local governments, charitable institutions, businesses, and schools. You can check your university or local community on what kinds of scholarships your child can be eligible for.
You can also check websites that feature thousands of scholarships each year for students who want to go to college and universities. Each year, millions of dollars of scholarships are left unclaimed. Scholarships aren’t only awarded for grades but also for athletic abilities and involvement in relevant extracurricular activities.
3. Registered Education Savings Plan (RESP)
Investing your money is one of the many ways to get enough funds and save if your child wants to go to medical school. It’s a tax-deferred investment backed by the government. RESP or registered education savings plan is a savings account that entitles you to grants from federal and provincial governments. The grants could reach 40% until the beneficiary or child is of the legal age of 18 years old.
Parents can contribute a lump sum of CAD$50,000 for each child, and there are no yearly limits on how much they want to contribute. Remember, though, that the withdrawals are taxable, and the deduction will be on the interest that the investment has earned. The tax is minimal and falls under the income bracket of the child.
4. Tuition Tax Credit
Parents and students can get leeway on education tax in Canada through a tuition tax credit. It’s an educational tax break where students aged 17 and up who enroll in a college or university can reduce taxable income by using their tuition fees. They also can transfer credit to their parents, grandparents, or spouses, amounting to a maximum of CAD$5,000.
Let’s say, you have saved CAD $10,000 for a year. The accumulated money is available between a summer job, withdrawals from RESP, and scholarships that aren’t taxable. You also helped pay CAD $6,000 for the tuition fee. There’s no need to use tuition tax credits if your amount exemption for the current year is CAD $11, 474 which surpasses your income. But if the elders in the family are all doing financially well, the student can save the tax credits and use them after graduation.
5. Start A Family Trust Fund
To many people, it may seem that a family trust fund is a tool simply for the protection of wealth that will someday fall into the hands of heirs. It’s a go-to for those with a significant amount of assets. But there are different types of trust funds that you can use for other purposes, even to send your child to medical school in the future.
You can set up a family trust specifically for your child by utilizing an account like MD Family Trust. It’s up to you how you will control or manage your assets. Once your child has a hold of the trust fund, they can save on tax by paying off the taxable gains according to the lower tax bracket.
6. Take Out A Loan
Anyone who is of legal age and with a stable income can take out a loan to fund anything they want. Parents can help them as well. There are many types of loans that you can also apply for to help your child through medical school. But keep in mind to borrow what you can return. It’s also a lesson that your son or daughter should learn to manage their funds. You can pull home equity if you have built enough of it, for example, to get access to cash that can help you and your child for other monthly expenses.
7. Invest Your Money
Adding more income streams to your primary is another way to save money. Investing your money in different ways that agree with your risk appetite can help you prepare for your child’s college education. You can choose to invest in stocks, use a robo-adviser, or buy exchange-traded funds (ETFs). Work with a stockbroker who can give you useful advice. Try passive investing if you’re inexperienced and move on to active investing when you gain more knowledge.
There are a few ways to gather funds or save on taxes that could help you send your child to medical school. You can find ways by doing thorough research and seeking the right people or organizations to help you and your child fulfil their dreams. It’ll take some time if you want to explore your options, so it’s better to start early while your child is still in elementary or high school.