Should you help your children graduate with less debt?


Your children and their education

We want our children to move forward in life. A good education can help determine the future of any young adult. But, what happens when your child’s post-secondary education costs an exorbitant price?

It is estimated that about 83% of parents expect to pay for their child’s post-secondary education. Many Canadian university studies, depending on your child’s chosen program of study and the province in which he or she studies, can cost tens of thousands of dollars. All this to say that if you decide to pay for your children’s schooling, you could end up in retirement a few years later than planned.

What your child’s education can cost

money cost

The truth? Tuition fees at Canadian universities have been rising in recent years, prompting numerous student protests across the country. This is a disadvantage, but it is quite inevitable for post-secondary education. According to the Canadian government, average tuition fees increased from $ 5,767 for the 2013/2014 semesters to $ 5,959 in 2014/2015. Double that and more if your child wants to study something like medicine or dentistry. Not to mention that most bachelor’s degrees take at least three years to complete. Then there are specialized and master’s degree programs. These are just the first calculations you just made.

There are also books to buy. Those of science and medicine can be extremely expensive. What if your child has to take public transit or drive to school? Is he in photography or similar art program where he has to provide his own course materials like movies, tools or painting? Make sure your children get their hands on the most used books and equipment. Most universities have second-hand bookstores and, hopefully, perhaps you have older children who have already graduated and can give their equipment to the youngest members of the family.

If your child is lucky enough to always live at home, you can save a little on living costs. What if he goes to school outside the province? Student housing can be a huge expense that must certainly be taken into account. If your child’s school provides student residences, make sure you have an idea of ​​what it will cost to live, as well as meal options that may be available.

Advantages and disadvantages of paying for their education

Say you do not expect your child to pay for school fees. This is often the case as it is difficult for most young adults to juggle part-time work with full-time studies. It is often a better idea for many students to focus on their education as much as possible and to work a little side to have money to spend. If they decide to go through a four-year program and tuition increases each year, their bachelor’s degree can be expected to be over $ 60,000.

One of the most common mistakes parents make is that they do not consider these costs. If they plan to pay the full amount of their child’s education, not saving money from birth can be a problem. In other words, waiting too long before starting to set aside for tuition could cost you a lot in the future. Depending on your annual income, the number of children you have, and how much you put into your RRSPs each year, you may not be able to retire before age 65.

Advantages? Your children will finish their post-secondary education without debt and will be able to face the world. Do not worry, it will not be the only benefit. If you decide to open an RESP for your child, and deposit money regularly, you will eventually be eligible to receive tax benefits and government grants.

Opening an RESP

A Registered Education Savings Plan (RESP) is a government account designed to help you set aside funds for your children’s education. Anyone can open this type of account, including parents, grandparents, guardians or other family members. If you and your child both have social insurance numbers, you can start adding money from birth. You can deposit money for all your children, with a maximum limit of $ 50,000 per child. As with a tax-free savings account, the funds you deposit into your RESP will increase without taxes. That’s not all. You will also be eligible for the Canada Education Savings Grant (CESG), which will add money to the account. With one of these grants, the Canadian government will provide 20% of any amount you deposit, up to a maximum of $ 500 per child per year. So if you contribute $ 2,500 a year, you will receive the $ 500. The maximum amount you can receive in total per child is $ 7,200.

Student loans

Student loans

If you do not pay for your children’s post-secondary education and do not receive scholarships or earn enough income, they can apply for a student loan. This is another financial assistance program put in place by the Government of Canada and varies according to your level of financial need. Prospective students must first apply and their file will be reviewed by Student Financial Aid Estimators.

One of the disadvantages of a student loan is that it could leave your child in debt. Six months after either going full-time, leaving school for good or graduating or leaving school for more than six months, they will have to start making regular payments on the loan. Depending on the program in which they decided to study, they will likely have accumulated a high fee. It’s up to you and them to find a loan provider that fits the needs and to set up a payment method that’s right for you.

Will you be able to retire?

Will you be able to retire?

If you decide to pay your children’s total education, based on your annual income, and the number of children you have who went on to post-secondary education, you may be able to retire before the age of 65 years. Maybe it’s worth it to see your child succeed. That’s why finding an RESP and student loans as soon as possible could be extremely beneficial for you and your children in the near future. Thanks to you, with a lot of effort and luck, after graduation, they will be able to earn their own income and be financially stable for the rest of their lives.

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