Every parent wants to see their child have the best shot at a prosperous life. And for many of us, the blueprint of that advantageous life starts with a post-secondary education. Yes, we groom our children from a young age to think about what they want to be when they grow up. There is a lot we can do to help our children attend post-secondary school and graduate in the best possible financial condition.
Let’s start with the ‘student loan creep’
Borrowing to put oneself through school has become a socially acceptable norm. So much so, that it’s easy for a student to lose track of exactly how their borrowings are used in day to day life. (Call it the ‘student loan creep’ – it just creeps up on them.) Many students end up spending more than they need or anticipated, to attain their goal of completing a post-secondary program. And by the time they realize just how much they owe, it’s simply too late to do anything about the significant tally.
There are a couple of reasons for this:
Firstly, your college-age child simply expects their lifestyle to continue where their life with you left off (i.e. I will buy and spend what I want, when I want).
Secondly, doing all the right things – like giving them an allowance when they were young and teaching them to save – is not enough. While learning how to save and spend are important lessons, knowledge of them doesn’t translate into an in-depth understanding of loans and compound interest.
Remember this: protecting your child from harsh financial realities should not be a priority. One of the most damaging things we can do is to refrain from teaching our children how to predict the consequences of their own actions, particularly their expensive actions.
Don’t just hand over the money
Yes, having saved for your child’s education from an early age is ideal. However, even though you’ve spent the last 18 years squiring away money to fund their life dream of being a doctor, that doesn’t mean you should just hand it over when the high-school cap and gown come off. If you look closely at the RESP paper work, YOU are the owner and your child is the beneficiary.
With that in mind, put some conditions in place before you ‘show them the money’:
- Scholarships. Require that your doctor-to-be show you 5 completed scholarship applications each year before you release their RESP funds.
- Develop a plan. Have your child map out a financial plan showing how they plan on paying for their education. Have them research costs such as tuition, books, and living expenses. Getting them to tally up the total cost of their adventures in academia might keep them from pursuing things they really aren’t interested in doing or paying for (i.e. a semester studying abroad is great, but not if it’s solely on your dime). Wishful thinking perhaps, but the reality of the cost of education may just make them all the more motivated to make the most of their time at school.
- Match it. Have your child save a portion of their income from their summer or part-time job, and then match it. Make sure they have a monetary goal in mind of how much funds they want released from the RESP, so they know how much they’ve got to save to get you to make up the rest.
Finding the money
No RESP? You can still help your child establish a better financial reality for themselves. Resources for your child (and yourself) to check out include:
Your child can also check out the institution they are applying to for other scholarship or bursary offerings, or meet with professionals working in their dream field to see if there are any association bursaries or other programs available to students.
Beyond the money
Whether you manage to fund your child’s education without borrowing a dime, or you end up financing the whole lot, do ensure that lump sums meant for education – or even living expenses – should never be in the student’s regular spending account. In other words, the student should never have a debit card attached to their education funds. A separate account accessible to both parent and child should hold the funds. As an example of managing this account, most institutions will allow you to set up an auto transfer for living expenses, with one-time transfers for tuition or books done manually.
Above all else, remember that the more a student has to think, plan and look at the reality of their post-secondary goals, the more likely they’ll be good stewards of their education savings. That alone will be the first step in helping them make a serious contribution to the world…beyond the college corridors.