Preparing for post-secondary education in Canada can be as daunting as trying to teach a cat to play fetch. Here are some financial planning tips to help your kids (and you!) navigate this exciting yet stressful time of year:
Budget Like a Pro: Help your child create a realistic budget for their first year of school. Include expenses like tuition, books, housing, food, and transportation. Consider having their car insurance, phone bills, and other expenses come out of their own account instead of yours. Even if you're financially assisting your child, consider setting up an automatic deposit from your account to theirs. This will give them a clear picture of their financial situation and help them avoid overspending. More importantly, it helps build a habit that will increase their chances of success once they start their careers.
Scholarships and Grants: Even if your child is starting school in a month, it's not too late to apply for scholarships and grants. Encourage them to reach out to their school's financial aid office for information on available funding. We have heard of many stories of smaller known grants with lower applications. If you don't ask you don't get.
Part-Time Work: In recent times, there has been a shift from children working part-time throughout their youth and in their post-secondary education, to a focus on not working and only focusing on school. While this can result in better grades, it also results in blank resumes. The reality is that degrees and certificates are no longer a rarity or special; they are the basic need. A lack of real work experience is viewed as a major reason why employers will hesitate to interview. If your child hasn't already secured a part-time job, now is the time to start looking. Many schools have job boards or career centers that can help students with local employers.
Financial Literacy: Take some time to educate your child about basic financial concepts like credit scores, interest rates, and budgeting. If your child needs to take out student loans, make sure they understand the terms and conditions. Encourage them to borrow only what they need and to make a plan for repayment. Help them learn the basics of wants vs. needs: Wants are things we desire, like the latest gadget or designer clothes, but they're not essential for survival. Needs, on the other hand, are the necessities of life, like food, shelter, and basic clothing, without which we can't function properly. It's important to prioritize needs over wants to ensure financial stability and well-being. This will help them make smart financial decisions both during and after their education.
Managing Timelines and Expectations: Children may rush to their parents with a school bill that's due in a couple of days. Without proper planning, parents will assume their children's financial stress. Unlike an RRSP, TFSA, or cash savings, taking money out of a RESP can take time. First, proof of enrollment (POE) for their qualifying program is needed.
Proof must be dated within 6 months of enrolment. Provide documents such as an enrolment or registration letter from the registrar’s office, invoice or tuition fees, and/or a class schedule. Acceptable proof of enrolment must contain all the information listed below; therefore, more than one document may be necessary. Here are some basic guidelines for POE:
Beneficiary’s name
School name and address (on letterhead or stamp)
Full-time or part-time status
Number of hours per week or month for part-time status
Program name
Length of program
Current year of program
Previous semester information if requesting more than $8,000 for full-time enrolment
Number of consecutive weeks of each semester for non-Canadian schools
Once the above is provided, a RESP withdrawal document must be completed and signed. This document, along with the proof of enrollment, is submitted. If everything is in good order, typically within 5 business days, proceeds can be sent to your bank. Banks can take 1-2 business days, and items such as holidays can add an extra delay by financial institutions. In short, giving yourself time will help in the case the proof of enrollment provided is incorrect resulting in needing to restart the process.
Using Government Dollars First: Some people could be unaware that they can prioritize using the government dollars (grants within a RESP) first when making withdrawals. Many financial institutions will process a mix of your dollars and government dollars for each semester's withdrawal. If your child chooses to not complete their schooling, only the remaining government dollars is what is at risk for clawback should they never return to school.
As always planning ahead will reduce stress. We are here to support your financial goals. If you require any assistance or have any questions, please do not hesitate to reach out to Cliff, Mario, Mark, or our TSG team.
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