Shortly after our son was born, my husband and I realized we had totally different views about how to finance his university education — my husband (the cold-hearted one) said he should pay his own way and I (the softie) wanted to start saving asap. Our opposite perspectives probably stem from how we financed our own university educations – he had to pay for it all himself and I had a lot more help from my folks (thanks Mum!).
Of course, back then it was a lot easier to pay your way through school (and for parents to chip in when needed). Tuition was a lot lower and there seemed to be more bursaries and grants available than there are now.
Today, it’s a different world — the cost of a university education has skyrocketed since we were in school. And it’s going to keep getting more expensive: some estimate that a four-year degree will cost upwards of $130,000 by the time our kids are ready to go.
My husband and I have since met halfway on the education savings question. We’ll end up paying for some of it – and our son (and now our daughter too) will have to pitch in the rest. Our approach to financing their post-secondary education will be based on three main things:
1. Free money
We’ve opened a registered education savings plan (RESP) to start saving for our kids’ education. It’s a special savings account that lets your savings grow tax-free. But the best thing about opening an RESP for your child is that it makes you eligible for the Canada Education Savings Grant (CESG). It matches 20% of your RESP contributions on an annual basis to a maximum lifetime grant of $7,200 per child. So, if you put in $500 in the first year, the government will give you an additional $100 in grant money. That makes it a no-brainer for us.
2. Setting expectations
Even if we could afford it, we have decided not to foot the entire bill for our kids’ education. We want them to contribute by working part-time and earning scholarships if possible. We will let them know this ahead of time so that they understand what is expected of them financially and how much they need to earn.
3. Yale’s out…unless, of course, they can get scholarships
Yes, an Ivy League school would be an incredible experience – but it’s one we can’t afford. We want our kids to be able to weigh both the financial and educational benefits and costs of choosing different schools. Will they live at home and go to school locally? Or will they move away? These choices impact how much their education will cost in the end – we want our kids to choose wisely.
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I like your blended approach of contributing some via the RESP, and having the kid contribute as well either financially or through scholarships. I definitely would like to help our child out, but I know I won’t be able to foot the whole bill.
Thanks for the comment! Yes, the blended approach definitely takes some of the pressure off parents and encourages kids to get involved in saving for a major goal (their education). It’s a good lesson to give them.
I wish people would stop uncritically repeating the “OMG, a degree will cost a million bucks!” hype, which seems to originate mostly with people trying to sell me sketchy education savings products.
We Canadians are lucky that we still have a fairly affordable educational system with a very high floor, quality-wise (i.e., our lowest-status universities are actually pretty decent). Most of us live within commuting distance (hint: live with your parents!) of a pretty good school.
Schools could/should be cheaper — governments need to step up and match their educated-workforce rhetoric with some cash, and schools need to stop treating huge undergrad classes as cash cows to fund ego-gratifying research centres and monumental buildings. But either moving to a low-tuition locale (Quebec, Newfoundland) for your degree, or delaying moving out on your own, will get you a four-year degree at a price you can cover with some reasonable planning and a part-time job (admittedly not always easy to find).
So yes, start the RESP, and fund it early and often. But also start researching schools, fees, programmes, tax breaks, and scholarships. And lean on your elected officials to support good, accessible education. And don’t worry so much!
Caroline:
I completely agree with your approach and see the same attitudes in most of my clients.My brother-n-law had a great attitude towards funding education. “Do your bachelors locally, live at home and I’ll help in anyway possible with your Master’s” That expectaion was set early and proved to be reasonable, affordable and allowed a few years of maturity to add to his children’s decision making.
Thank you for a great post
We’ve opted for the blended approach as well. On the one hand, the ‘gift’ of ‘free’ money from the feds was just too good to pass up. And since our kids don’t seem to be on scholarship tracks, they’ll likely be paying 100% of costs. So we started saving early.
On the other hand, I’ve heard from many parents, some quoting studies (sorry I can’t remember them) that show kids who DON’T pay for a considerable amount of their tuition have a much greater drop-out rate. So our kids will be paying about half, with conditions on the ‘gifted’ portion.
Like many things in life, you care a lot more about it when you’re paying for (even some of ) it.