Minimize post-secondary education debt with these tips
There are more than two million full and part-time students at Canadian universities and colleges, according to Statistics Canada, and for those who leave home to study, a four-year university education could cost as much as $90,000. The funding crunch can be made smoother if students — and their parents — are financially prepared. The Star reached out to financial adviser (and father of three) Darren Farwell, director of wealth management for the Farwell Group, for his top tips on financing a post-secondary education with the smallest amount of debt possible.
Those first days in college or university “may be the first time they have to look after their own finances,” Farwell said. “Early adulthood is an important stage in a person’s life and they can lay solid financial habits for the rest of their lives.”
Tips for students:
Create a budget for weekly and monthly spending — and stick to it. Research shows people with a budget spend about 10 per cent less than people who don’t.
Start saving now, even if as a student you have a small income. This lays the foundation for good financial skills — and both interest and funds can accumulate fast.
“If you’re just starting out, consider conservative investments like GICs or mutual funds,” Farwell adds, noting some universities have investment clubs where students can learn about the market.
If you’re 18 and file a tax return, open a Tax-Free Savings Account (TFSA) — even if there’s no money to deposit.
Contribution room accumulates annually, and by the time the student reaches 25, he or she will be able to put aside as much as $35,000 to compound tax-free.
Look into getting a part-time job or a co-op placement within your program to help make extra money — and help with time-management skills.
Take advantage of all scholarships and bursaries, which is essentially free money. Some scholarships are automatically given while others re- quire applications, so do your homework and see what you qualify for — it’s worth it. Tips for parents:
If you choose to help your child out with post-secondary expenses, consider investing in a Registered Education Savings Plan (RESP) to help finance his or her education. The government will give up to $7,200 in grants (around 20 per cent of your contribution) — and who doesn’t like free money?
Start teaching your kids about financial literacy at a young age. Open abank account, talk about budgeting, and lay the ground work for your child to grow up to be a financially savvy young adult.
Make sure you have a chat about finances so the child you send off to school understands basic principles.
This includes, among others, how to write a cheque, lines of credit, interest rates, online banking and paying bills.
Strike a balance between financially supporting your children and giving them enough room to develop their own financial independence, Farwell advises.
For example, if you’re helping finance your child’s education, consider giving them regular bi-weekly payments as opposed to one lump sum they may be tempted to spend all at once.