Maybe you haven’t given much thought to saving for your child’s education. The truth is, a four-year university education is expected to cost between $100,000 and $130,000 by the year 2020, depending on whether the child lives at home or at school.

While there are several ways to pay for an education, saving for that education is the surest way to pay for it. Let’s compare three common ways to save.

1) RESPs
An RESP works like a trust in that the contributor (known as the subscriber) sets up a plan for the future student (the beneficiary).

The subscriber can contribute up to a lifetime contribution limit of $50,000 per beneficiary. The available CESG is 20% of any contribution made to an RESP after 1997, provided the beneficiary is a resident of Canada.

2) In-trust accounts
Prior to the introduction of RESPs, in-trust accounts were a popular way to save for a child’s education.

Many people still use in-trust accounts for the very reason that there are no contribution limits. This means that, where the assets inside an RESP won’t be enough to provide for a child’s education, an in-trust account can be used to fill the gap.

3) Formal family trusts
Another strategy for education savings is to set up a formal family trust.

A trust is a relationship between three parties: the settlor (who transfers the assets to the trustee); the trustee (who holds legal title to the assets); and the beneficiary (the person for whom the assets are held).