Save for post-secondary

Parents and Children Working Together to Save for Post-Secondary

I like to say that buying a home is a team sport. You have so many players involved – the real estate agent, home inspector, real estate lawyer and sometimes the bank of mom and dad. Well, if buying a home is a team sport, so is attending post-secondary education. The “bank of mom and dad” is often a phrase associated with buying a home, but it can also be used in the context of paying for a post-secondary education.

Going to college or university isn’t cheap these days. Employers often want a college or university education before they’ll consider you for employment, making post-secondary education a must in many fields. How are students paying for this? Many are going into debt, big time. The average student debt upon graduation, according to the Canadian Federation of Students, is $27,000. Ouch! And that’s even before your son or daughter has landed a full-time job. There has to be a better way to pay for post-secondary education and thankfully there is. By paying for it together, parent and child.

Contributing to an RESP Together
The best way to save for your child’s education is a Registered Educations Savings Plan (RESP). With an RESP, when you contribute $2,500 each year, your child is eligible for $500 in government grants. Essentially, that’s free government money that doesn’t need to be repaid (provided your child attends post-secondary education).

In a perfect world, every single parent would take full advantage of RESPs. Unfortunately, that isn’t happening. Parents have other financial obligations – the mortgage/rent, utilities, retirement savings and the list goes on. And if you’re a parent without a company pension plan like most, it can be tough to simultaneously save for retirement, contribute to your TFSA, RRSP and find money left over for your child’s RESP. So, instead of going it alone, why not make it a team effort?

There’s nothing stopping your child from contributing to their own RESP as soon as they get their first part-time job. To encourage them to contribute, why not say that you’ll match every dollar that they put in? For example, if your son or daughter puts in $1,000, you’ll match it with $1,000 of your own. Your adult child with have more money in their RESP, less student debt upon graduation and you’ll teach them a valuable lesson in savings. It’s a win-win situation.

If other family members want to help out like grandparents, aunts and uncles, the more the merrier. With everyone contributing to a family RESP, your child is more likely to take full advantage of the government grants.

Going back to my housing example earlier, they often say that renters don’t have the same pride of ownership as homeowners. Whether it’s true or not, it makes a lot of sense. You care about something a lot more when you have a vested interest. The same can be said about post-secondary education. By getting your child involved in saving for their own RESP early on, they’re more likely to appreciate it a lot more since you’re not paying for it entirely for them. They’ll take the decision of choosing a program with good job prospects a lot more seriously as they’ll see it as an investment in themselves.

Letting Your Adult Child Live at Home Rent-Free During the Post-Secondary Years
If you can’t afford to pay for your child’s full education, there are other ways you can help out. Room and board is a major expense for students. If your son or daughter is going to school within commuting distance from home, by letting your child live at home rent-free during the time they’re going to school, it can help them graduate with a lot less debt.

To ensure your child is still contributing around the house in a meaningful way, consider coming up with a list of responsibilities, such as mowing the lawn, shoveling the snow and doing the laundry. It will be good practice for them when they’re out on their own in the “real world” with their first full-time job after graduation so that they can be successful and hit the ground running.