TD Bank is out with some research that attempts to put a price tag on university education.

It estimates that by 2020, parents will be paying $125,200 to put their kids through four years of school; more than double the bill today. However, the cost is 40% lower if the kids stay home to go to school.

“From a financial planning point of view, the challenge is estimating the rate at which the total bill for university education will rise in the years ahead. While the Bank of Canada is likely to keep inflation at close to 2%, an examination of student spending patterns suggests that the total cost of a university degree is likely to rise at close to a 4% annual pace in the next two decades,” notes TD.

TD estimates that parents should be putting away $2,400 a year to meet this expected expense. “If a household takes advantage of tax shelters, such as a Registered Education Saving Plan, and assuming a 7.5% return on a well diversified portfolio of financial assets, $2,400 a year (including the government contribution), or $200 a month, must be put aside from when a child is born to fully fund a four-year undergraduate degree if the student goes away to school.”

Without the tax shelter, and assuming the household faces a 40% combined federal and provincial income tax rate, the required annual savings increases to $3,500 a year, TD says.

These calculations say nothing about the source of funds, such as the availability of scholarships, and assumes that the student will have no school-related debts at the end of the education. “The clear message is save early, save often,” says TD.