For many families, few investments feel as meaningful as investing in their child’s education. While that may mean aiming for an Ivy League degree, the race for academic advantage often starts much earlier, with private or boarding school enrolment.
“An elite education is still seen as a gateway to elite networks,” says Sarah Burke, Wealth Planning Consultant at BMO Private Wealth. “This perception drives parents to consider prestigious private schools and universities – even when the price tag is substantial.”
While the steep cost of post-secondary education is well known, private school fees can be just as daunting. Many families underestimate these costs”, Burke notes. “If you want to give your child access to the best education money can buy, it pays to understand the numbers and develop a tax-efficient strategy for funding them.
Understanding the costs
In Canada, private school tuition can range widely – from a few thousand dollars to more than $80,000 per year, depending on the school and grade.
- Day schools: Typically $15,000–$30,000 per year
- Boarding schools: Often $60,000–$80,000 per year
These figures exclude extras like books, uniforms, technology, extracurriculars, and trips. Over the course of elementary and high school, tuition alone could add up to $200,000–$400,000 per child. Once university arrives, the costs continue:
- In-province program (4 years, including residence, food, and books): up to $100,000
- Ivy League or top-tier U.S. programs: CAD $400,000+ over four years
When a RESP won’t do
The Registered Education Savings Plan (RESP) is the go-to savings tool for post-secondary education. But it has limits. RESP funds can’t be used for private or boarding school tuition, and certain lifestyle or travel costs aren’t covered.
For affluent families seeking flexibility across all stages of education, a discretionary family trust can be an effective alternative.
“With this approach, parents or grandparents contribute assets to the trust and appoint a trustee to decide when, how, and to whom distributions are made,” Burke explains. “This ensures the flexibility to adapt to changing educational needs while keeping the family’s wealth strategy intact.”
Tax advantages of a family trust
- Income splitting: A trust can shift investment income to lower-income beneficiaries, reducing the overall family tax bill.
- Intergenerational benefits: A trust can remain in place beyond school years, supporting other long-term family goals.
Note: Canadian attribution rules prevent income splitting with minors (except for capital gains) when the funds come from parents, but contributions from grandparents or other relatives may avoid these restrictions.
“A trust is not a “set it and forget it” strategy”, Burke warns. “It requires active management, compliance oversight, and careful integration with your broader wealth plan.”
Front-loading your RESP for maximum growth
Even if you’re funding private school, you shouldn’t overlook the RESP for post-secondary savings. Burke recommends opening a RESP as early as possible to take full advantage of compound growth and the Canada Education Savings Grant (CESG).
Front-loading (making larger contributions early) maximizes growth potential while still capturing the annual CESG:
Example strategy:
- Contribute $16,500 when your child is born
- Add $2,500/year for 12 years
- Add $3,500 in the final year
This approach hits the $50,000 lifetime contribution limit per child and secures the maximum CESG of $7,200 (20% of eligible contributions, up to $500/year).
“Front-loading works best if you have non-registered funds you won’t need for your own goals,” Burke advises. “It generally doesn’t make sense to withdraw from a TFSA or RRSP to do this.”
Plan for inflation and currency risk
Private school tuition tends to rise 5%–7% annually, faster than general inflation. A robust education funding plan should account for these increases. If U.S. schools are on your radar, consider:
- Building your budget in U.S. dollars
- Using a conservative exchange rate in projections
- Opening a U.S. investment account early to reduce currency conversion risk later
Education planning in the bigger picture
A strong education plan is most effective when it’s part of a comprehensive wealth strategy. A tax or wealth planner can help you:
- Integrate education funding with retirement, estate, and investment goals
- Take advantage of changing tax rules and incentives
- Keep your plan flexible as your child’s needs evolve
“Education planning should always be part of a broader wealth plan,” says Burke. “We help families understand not just what their goals are, but also how to fund them efficiently.”
Bottom line:
From private school to Ivy League ambitions, education costs can be steep – but with the right strategy, they don’t have to derail your other financial priorities. By combining flexible structures like family trusts with RESP advantages and smart tax planning, you can give your child a world-class education while protecting your long-term wealth.
