A child born in Canada today could pay more than $140,000 for a four-year university degree, according to a new Bank of Montreal report.

The report shows that tuition costs have been rising faster than inflation at times. In the early 1990s, average undergraduate fees in Canada were $1,464. Today, they are $5,581.

And while inflation was only 1.3 per cent in 2012, tuition fees increased 4.3 per cent.

The bank reached the $140,000 estimate using its education savings calculator, which takes into account province, school, housing costs and inflation.

“It could be a very shocking sticker price if (parents) haven’t saved for their child’s education,” said Chris Buttigieg, senior manager of wealth planning strategy at BMO and an author of the report.

“They may find they will have to dip into other savings that are earmarked for other goals, such as retirement.”

Canadian university graduates are already struggling with an average debt load of $27,000, according to the Canadian Federation of Students. A four-year degree currently costs about $60,000.

The vast majority – 83 per cent – of parents surveyed by BMO say they expect to pay for their child’s university education. Forty-four per cent say they also expect their child to contribute.

However, three-quarters of parents have not made a detailed estimate of how much a degree will cost and only half have set up a Registered Education Savings Plan (RESP).

“It’s important to begin with the end in mind. Know what the costs of post-secondary education will be in order to give (your children) a promising future,” said Buttigieg.

Even though many parents feel they cannot afford to save for their child’s education, it pays to start small and start early, he said.

For example, if parents contribute $2,500 per year to an RESP for 12 years starting when their child is born, compounding returns will result in a balance of $55,992. But if parents start an RESP when their child is 12 and contribute $5,000 per year for six years, the balance will only be $35,391.

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Further, only about a third of parents are taking advantage of the available government grant. Only a fifth was aware of the Canada Education Savings Grant, which matches 20 per cent of the first $2,500 contributed annually to a maximum of $500 a year.

The report, by the bank’s new Wealth Institute and titled “Student tuition and debt on the rise: RESPs and beyond,” is based primarily on a survey of 1,400 Canadian parents in February 2013.

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