Should I save for my children's university education in Canada, or am I better off paying off loans and gaining debt room?
At the very least I'd look closely at what you could get from the RESP (Registered Education Savings Plan). Depending on your income the government are quite generous with grants and bonds you can get over $11,000 of 'free' money if you qualify for everything CESG - Canada Education Savings Grant  By applying for the CESG, up   to $7,200 can be directly deposited by the Federal Government into   your RESP. The Canada Education Savings Grant section offers   information about eligibility requirements for the grant as well as   how to use it when the beneficiary enrolls at a post-secondary   institution. CLB - Canada Learning Bond CLB is available to children   born after December 31st, 2003 if an RESP has been opened on their   behalf. Browse the Canada Learning Bond section to find out who is   eligible, how to apply, and how much the Government of Canada will   contribute to your RESP. I can recomend the TD e-series funds as a low cost way of getting stock market exposure in your RESP So if I were you... As an example if you earn $40k and you pay in the minimum amount to get all the grants ($500/year, $42/month) assuming zero growth you'll have almost $14k of which $5.4k would have been given to you buy the government, if you can afford to save $200/month you'll get over $11,000 from the government
Dazed, an RESP is a type of account.  Within the RESP, you can have cash, investments or even savings vehicles like GICs etc.  So depending on where you put the money within the RESP, yes, there is a chance of losing money. If you think your children will attend post secondary education, I don't think that there is a better way to save.  The government will match 20% of your contribution, up to a maximum grant of $500 per year. To take advantage of the grant, we contribute $2500 per year to obtain the maximum $500 grant. Hope this helps! "Thank God you have your child back, it is so awesome that you finally found a medical treatment that worked.  It must have been a truly trying time in your lives.   That situation is an important template in personal finance.  Through no fault of your own, a series of events occurred that caused you to spend far more money then you anticipated.  Per your post this was complicated by lost income due to economic situations.   What is to say that this does not happen again in the future?  While we can all hope that our child does not get sick, there are other events that could also fit into this template. Because of this I hate all options you present.  Per your post, you are pretty thin with free cash flow and have high income, and yet you are looking to borrow more.  That is a recipe for disaster with it being made worse as you are considering putting your home at risk. The 20K per year per kid sounds like a live at the university state school; or, a close by private school.  Your finances do not support either option.  There are times when the word ""No"" is in order when answering questions.   Doing a live at home community college to university will cost you a total of about 30K per kid rather than the 80K you are proposing.  Doing this alone will greatly reduce the risk you are attempting to assume.  Doing that and having your child work some, you could cash flow college.  That is what I would recommend. Given that you are so thin, you will also have to put constraints on college attendance.  No changing major three times, only majors with an employable skills, and studying before partying.  It may be worth it to wait a year of two before attending if a decision cannot be made. I was in a similar situation when my son started college.  High income, but broke.  He worked and went to a community college and was able to pay for the bulk of it himself.  From there he obtained a job with a healthy salary and completed his degree at the University.  It took him a little longer, but he is debt free and has a fantastic work ethic." It depends on where you live and what your situation is. If you're a born and bred New Yorker who thinks that White Plains, NY is a stop on the way to Canada, than you're ok. If you're a single person living in downtown Boston, you may want to err on the side of spending less. You may find yourself in a situation in a few short years where you significant other has a job in the suburbs and the prospect of sending your child to a city school is not appealing. Pro tip (I'm a financial advisor): some people aren't lucky enough to have rich parents or relatives who will pay for their education. Those who aren't poor or wealthy are caught in the middle, unable to pay their way and unable to get enough grants to pay their way. Scholarships are never a given. Using debt to increase your intrinsic value is a wise investment. I think about debt as a good option for capital investments that offer a return. In my opinion, a house and clothes you need for that new job are good things to borrow for. School is ok, depending on the amount. Car is ok, if it's a 3 year loan. The rest is not good. You should try to carry as little debt as possible, but don't let it dominate your life. If faced between the choice of paying ahead on your student loan and blowing $300 on an XBox, you should pay the loan. If the choice is between taking your kid to the zoo and paying the loan, have fun at the zoo. I would not advise you to go entirely broke in order to clear debts. You could use the cash you have to invest, or render some other services other students need in school while you raise cash from doing so. Since your child is 2, he has a long time horizon for investment.  Assuming the savings will be used at age 19, that's 17 years.  So, I think your best bet is to invest primarily in equities (i.e. stock-based funds) and inside an RESP. Why equities?  Historically, equities have outperformed debt and cash over longer time periods.  But, equities can be volatile in the short term. So, do purchase some fixed-income investments (e.g. 30% government bonds and money market funds), and do also spread your equity money around as well -- e.g. buy some international funds in addition to Canadian funds.  Rebalance every year, and as your child gets closer to university age, start shifting some assets out of equities and into fixed-income, to reduce risk.  You don't want the portfolio torpedoed by an economic crisis the year before the money is required! Next, why inside an RESP? Finally... what if your kid doesn't attend post-secondary education?  First, you should probably get a Family RESP, not a Group RESP.  Group RESPs have strict rules and may forfeit contributions if your kid doesn't attend.  Have a look at Choosing the Right RESP and Canadian Capitalist's post The Pros and Cons of Group RESP Plans. In a Family plan, if none of your kids end up attending post-secondary education, then you forfeit the government match money -- the feds get it back through a 20% surtax on withdrawals.  But,  you'll have the option of rolling over remaining funds into your RRSP, if you have room. Not a financial adviser, but I think there is some amount of debt that's ok.  So I wouldn't suggest someone should go $200k into debt for a BA in English, but if you went somewhat into debt, say $30k, for a major with good job prospects and a high salary, it will probably be a good decision.  Which is exactly what I did, and it worked out very well for me.  I would advise students to apply to lots of schools with different entry requirements and tuition rates, just to see what their financial aid packages are like.  Very often if a $50k a year school really wants you, they'll give you some scholarships to make it more affordable.  If they don't give you enough, then you may just need to go to a cheaper school.   edit: also, if your family isn't wealthy (like mine) you'll often qualify for federal loans.  My loans from 2012 are at 3.5% interest, and my financial adviser is telling me to make the minimum payments so I can put more money in stocks. I'd like to propose a 4th option: Let your kid(s) take out their own student loans, and then you can make payments directly to help them pay them down. Some advantages to this method: Note the many similarities to the HELOC, which would probably be my second choice. If you have any non-mortgage debt – e.g. a credit card, a line of credit, a student loan, or a car loan – then I would pay that down first.  The interest being paid on that kind of borrowed money likely exceeds what you could expect to earn in reasonable investments. If you don't have any non-mortgage debt, and your mortgage is large (e.g. thinking about it keeps you up at night, sometimes :-) then go for the the extra mortgage payment.  Also go for the mortgage if you're paying at a relatively high interest rate compared to what you could expect from investments. If your mortgage is small (e.g. it's going to be paid off in a few years) and at a relatively low interest rate, then I would choose the RRSP or TFSA. Unless you're in the top income tax bracket, I would favor the TFSA over RRSP – TFSAs were only introduced this year and any balance there already is likely tiny compared to the RRSP. For retirement, I'm aiming to have equal amounts of RRSP and TFSA money. One option you haven't mentioned is an RESP.  If you have children under the age of 18, your bonus could also be used to make next year's RESP contribution and qualify for the 20% matching Canada Education Savings Grant (CESG) from the government. Tl;dr by anecdata I paid for my master's degree from investments/savings with a HELOC backstop  It appears you don't have the 62k cash needed for tuition and living expenses so your decision is between financing a degree by selling your investments or a loan.   Ultimately this comes down to the yes/no sell decision on the investments.  Some things to consider: Did you account for college? That's 40k per year in tuition alone. Also I'm not sure you accounted that the number included income forgone, as in if they weren't taking care of the kids they could've been earning more money. The article says the cost to *parents* is 900,000 per kid, but that doesn't mean the parents are actually spending 900,000 per kid.   Lots of other things to account for...a couple w/o kids doesn't need to get a 4-bedroom house for example. Does your co-worker own a house? Did you account for the cost of ownership? You're doing great.  I'd suggest trying get putting 5-10% towards your retirement and the balance to the student loans. You are a little weak in retirement savings, but you have $550k house with 20% equity that you bought at the bottom of the market. That's a smart investment IMO, and in my mind compensates somewhat for your low 401k balance. If I were you, I would retire the student loans ASAP to reduce the money that you have to shell out each month. That way, you have the option of scaling back you or your wife's work somewhat to avoid paying thousands for child care. In my mind, less debt == more options, and I like options. "Also, since I'm guessing OP isn't flush with cash, not having to come up with additional money to pay the student loans for some time will provide some short-term ""debt relief""... possibly reducing the possibility of racking up more CC debt." My son is in a similar situation where he is 21 and in college. My wife and I claimed him as a dependant on our taxes last year. He had still been able to get some student loans as a dependant as well as scholarships. I have told him that we will not cosign on a loan for him. It isn't because we don't like our son, it is simply because too many unexpected things can happen.  He has been working multiple jobs which is one thing I would suggest as well as donating plasma for extra money to have a social life. As an electrical engineering major he doesn't have much time to be social. He cuts rent by having roommates and does most of his own cooking to help with food costs.  The main thing he does to keep his costs under control is attends a school that isn't outrageously expensive.  An expensive school does not offer as much benefit for an undergrad degree as it might for a graduate degree.  Another option is to look for a job that had some sort of tuition assistance.  Another option along that same line is look into military service either active duty or reserves as there is tuition help to be found there. There are options that don't involve debt. As a side note my son used a student loan last year however, this coming year he has his budget figured out and he will not be needing one at all.