STUDYING SAVINGS
Financial experts give tips to keep your budget in line this school year,
For the Steinfelds, a family of six living in Vaughan, buying school supplies for their daughter heading into Grade 1 wasn’t as simple as shopping for a knapsack and a few pencils.
“Monster High pencils, My Little Pony erasers, Barbie-branded supplies is what she wants,” says Daniel Steinfeld, a local consultant and father of four children ages 6, 3, 2 and 2 months. “As the kids get older, they increasingly want what’s ‘cool’ and we do our best to try to teach them the difference between needs versus wants.”
School supplies are just the onset of expenses that drain parents’ pockets. Between lunches, clothes, extracurricular activities and birthday parties, parents are likely to spend between $3,000 to $4,500 a year, according to a 2013 Fraser Institute paper.
With their two eldest children outgrowing new clothes once or twice a year, wardrobe costs the Steinfelds the most.
“With such ever-changing weather in Toronto, the need for several wardrobes per kid makes the cost that much greater,” adds mother Katie Steinfeld.
As children move into middle school and high school, expenses become more cumbersome, with cellphones and data charges added to the mix, says Sarah Widmeyer, managing director and head of wealth advisory services for Toronto-based CIBC.
“There’s a ‘latte factor’ that comes into play once kids start having a cellphone and start buying apps,” says Widmeyer. “A few dollars on a cellphone application may not seem like a lot, but it’s an attitude that can quickly grow out of hand if parents don’t stay on top of it.”
This is why every expense should be an opportunity to involve kids in the financial conversation, adds Widmeyer.
“Without solid discussion and learning around budgeting, the differences between needs and wants, children can end up viewing their parents as a personal ATM machine.”
And it can go on as children grow older. More than 50 per cent of post-secondary students will end up asking their parents for additional financial support throughout the school year because they’ve run out of money, according to an August poll of 1,000 parents CIBC conducted. Despite this, 86 per cent of parents believe they are good financial role models for their children.
The reality is that it’s tough for parents to say no when they can afford to say yes, says Patricia Lovett-Reid, chief financial commentator for CTV News.
“It can be difficult to teach your kids financial tough love, especially if it comes out of nowhere.”
So how can parents save during the school year without disappointing their children? Our experts suggest these money saving tips: Make lunches at home “Eating at the cafeteria wasn’t an option for our children,” says Lovett-Reid, who taught her four children to make their own lunches at an early age.
However, even with homemade lunches, there is the risk that certain food items end up becoming branded, trendy and expensive, adds Daniel Steinfeld.
“We treat this the same as toys or clothes that the kids may want: in moderation, with unbranded food items to keep costs down.” Buy in bulk and at the dollar store whenever you can Whether it’s art supplies or underwear, buying in bulk for a few children is a no-brainer.
“Costco is a frequent destination of ours,” says Katie Steinfeld. Also, by visiting Dollarama and Walmart, you can often find art or school supplies that would cost three to four times less than they would at specialty supply stores. Involve children in the budgeting decisions Every August, Lovett-Reid’s family would sit down for a school-year budgeting discussion. Each child would present the list of supplies they needed/wanted, while Lovett-Reid and her husband put forward the amount of money they could afford for the year.
“Once we gave them the funds, it was their choice to follow through with their plan and live with the consequences if they didn’t.” Start a registered education savings plan An RESP is a savings account where investments can grow tax-free towards a child’s post-secondary education. The government will match your contributions to this account by 20 per cent, up to an annual maximum of $500 for each child and a total lifetime limit of $7,500.
“Even with a small investment each year, the potentially huge expense of a post-secondary education is much more manageable,” says Katie Steinfeld. “It’s also a great tool to start teaching our kids about saving.”