Helping Kids With University Costs, Idea #214

If you are planning on trying to help your kids out with their University costs (or other post-secondary ideas), an RESP is a must (just for the free money), however, that is not the only way to ensure you can easily help out your kids reach their educational dreams (or your dreams for their eduction).

I have learned after 8 years of paying for children’s expenses for school, that the most debilitating university costs are not tuition, it is the cost of accommodation. At one point in the 8 years I was

  • Paying the mortgage on my house
  • Paying rent of 3 separate apartments across Canada

When did I become so rich that I could afford this (you might ask)? (sarcasm alert) I most assuredly did not, the RESP money helped somewhat, but these kind of costs can almost double your family living expenses. Living expenses for your kids at school really do add up.

There are remedies for this kind of expense (luckily):

  1. Do not allow your child to move away from home while they are going to University. Whether you really want to inflict this on yourself, is a question you must ask, but that will eliminate many of the living expenses. I know at least one set of parents that said, “I will pay for your tuition, and give you a car to use, if you stay at home. If not, it is all on you.”
  2. Pay off your house before your kids get to University, that way you are rich enough to be able to pay for the rent on “N” different apartments (or residence rooms) (where N is greater than 1).
  3. Make your kids pay for their living costs.
  4. Make your kids pay the whole shot. They want an eduction, time to learn about money at the same time.

Option (2) on the list is a very good target to try to hit, but kind of hard if you are maxing out your RESP, TFSA, and RRSP savings targets as well, but still something to keep in mind!

Options (3) & (4) sound heartless, but I know plenty of folks who paid for their entire University career, because their parents couldn’t help out, and they seem to have survived.

Keep in mind, University costs are not just tuition costs.

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The Business of University Fees

For those of us who have kids about to return to University we are about to see the onslaught of fees that are charged by all Universities (in Canada). There are many fees being charged, but the two that caught my eye (on my daughter’s tuition bill from Queen’s University) were:

Grad Health Insurance 2016 Fall 2016/09/30 $280.00
Grad Dental Insurance 2016 Fall 2016/09/30 $220.00

For those who do not want to do the arithmetic, that is $500 for 4 months.

The Noble and Under-appreciated Stubby

Don’t see any beer taxes on the tuition bill (luckily)

Remember that if your child is in school your health insurance plan covers both Health & Dental (if you are covered that is), so you really don’t need to pay this fee, and most universities will allow your child to opt out of the charges (which seem quite high to me). I have checked with our friends at LSM Insurance who think the fees are a little high, but not too bad. Another factor to take into consideration is that a lot of Health Plans have positive enrollment clauses (I am with SUN Life for health insurance and that is the case), where you must every year (after a child turns 19 I think) go to the Insurers web site (or send in a form) stating that your child is still at school, or the child loses their coverage under the plan.

How easy is it to opt-out of the health and dental fees at University ? At most schools, not as simple as you might think, and deciphering which fees are optional, and which are mandatory is a real quagmire of data.

I remember folks opting out of fees when I was at University, but typically those were the folks that were paying their own way, and didn’t want to pay for things they weren’t going to use.

What are some other fees from Queens University ? These add up to almost 25% of the tuition bill we are paying (note that residence or living expenses are not here either). Still think you won’t need an RESP to help your kids go to University? I’d also like to remind those with younger kids that there is no legislation limiting the fee levels (tuition yes) or how much they can increase.

Charge Amount
Student Assistance Levy $40.15
Education Society Fee $10.00
Athletics $168.41
Student Wellness Services $58.93
Campus Observation $0.50
Work Bursary Program $5.38
Student Life Centre $21.50
SGPS Society Fee $45.72
Telephone Aid LIne Kingston $0.75
Legal Aid $5.00
Sexual Assault Crisis Centre $1.25
Canadian Federation of Student $16.24
SGPS Student Advisors $3.81
SGPS Accessibility $3.00
The Queen’s Journal $3.50
CFRC $7.50
Walkhome $19.86
Oxfam $0.87
Bus-It $66.25
Qns Internl Affairs Associatio $1.00
SGPS Sports Fund $2.00
Queen’s Food Centre $1.25
HIV Aids Regional Srvcs. $1.00
Union Gallery $3.00
Queen’s Daycare $1.00
Four Directions Aborig Stdnt C $1.00
Dawn House Women’s Shltr $1.07
Q Intern Stdnt Soc Bursary Pgm $0.71
Student Refugee Support $3.37
Reelout Art Project $1.80
Positive Space Program $0.34
Kingston Youth Shelter Project $1.00
Yellow Bike Action Group $0.60
Ban Righ Foundation $3.00
The Grad Club $20.00
Centre for Teaching & Learning $1.35
Sexual Health Resource Centre $0.92
SGPS Sustainability $1.50
Levana Gender Advocacy Centre $0.81
Kgston Loving Spoonful Charity $2.00
Grad Health Insurance $280.00
Grad Dental Insurance $220.00

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Proliteracy.ca – Like Cheese on Vegetables

Let me preface this, that this is a Guest Post from a group of chaps I tripped over a while ago. Sounds like an interesting idea to me teaching folks about the costs of University, they are looking for feedback, have a read and see what you think.

Feels like cheese

by Alfred Yang

For those of you who lived through the 90’s, remember that old Cheese Whiz commercial where kids are reluctant to eat their vegetables until they’re garnished the amazing product? Well, that commercial kept replaying in my head as I worked on Proliteracy.ca, a free tool that helps Canadians plan finances for post-secondary education.

I can’t help but get the feeling that personal finance education is a lot like vegetables.  We all know it’s good for you, but it isn’t that appealing, especially to young people.  I feel like our team at Proliteracy.ca is trying to create the secret sauce that makes something dry and boring more consumable.

Fortunately, from the start of our journey we’ve met many organizations and individuals who share the same passion for promoting financial literacy.  Subject matter experts in the field of personal finance, like Big Cajun Man, gave us the motivation to continue our work.   Today, Proliteracy.ca is available to all Canadians looking to understand post-secondary financing.

The secret sauce?

Despite the rapid evolution of financial technology, it has yet to change the way most consumers educate themselves about personal finance.  The internet gives us incredible access to information, but it can be overwhelming.  The Proliteracy.ca team wanted to find a way to help people filter through the noise to focus on what’s really important to their own situations.

Our team wanted to start by helping students and young parents, a demographic that is arguably the least motivated to learn about personal finance.  Ironically, most members in this very same demographic have a major financial hurdle to overcome – financing post-secondary education.  Tuition has been increasing steadily in the past two decades and according to the Canadian Federation of Students the average new grad from university owes over $28,000 in student debt.

Through extensive research, we found plenty of information on financing post-secondary education, but when considering our own personal situations, a number of questions still remain unanswered:

  • If I have a young child today, how much should I be saving towards?
  • How does studying in a different school or different city impact my cost?
  • How much money should I set aside each month so that I am not too late by the time my child is ready for college?
  • Beside savings, what other financing options are available?
  • How does borrowing impact my child’s financial future?

Proliteracy.ca aims to help forecast the cost of education based on each student’s personal situation. We do the heavy lifting to organize data that’s freely available so that it’s more accessible and easier to understand.

First, we prompt you to answer a few questions, including programs and schools of interest, and the year of enrollment. Then we forecast the cost of tuition, books, and other expenses based on historical data. The end result is a good estimate of the financial target you or your family should be aiming for when planning for post-secondary education.

With an understanding of cost, we’re able to suggest a variety funding options starting with the least expensive options: savings, grants and scholarships.  We build awareness to great federal programs like the Canadian Learning Bond (CLB) and Canadian Education Savings Grants (CESG) and highlight the impact they have on RESP savings.  We also perform grants and scholarships matching, allowing families to take advantage of resources that are otherwise unknown to them before taking on debt.

Eat your vegetables, they’re good for you

In October, we ran a pilot program at three different high schools in the Greater Toronto Area.   We found that students and many young parents are generally not motivated to learn about personal finance and most are not prepared for the high cost of post-secondary education.  Tuition is increasing well beyond the rate of inflation, and a child’s college or university education a decade from now could easily set a family back by over six figures.  Most individuals we spoke to admit that they are planning finances for post-secondary education too late.

Like eating vegetables, financial planning needs to start early in life.  When confronted with a significant financial hurdle like cost of post-secondary education, families need to get into the rhythm of saving, learning about funding options and understanding the implications of debt.

We need your help

Since our pilot launch, we’ve received a lot of encouragement and feedback on how we can improve. While our team is making great strides towards creating an amazing planning tool, we can get there a lot faster by working with individuals and organizations who share the same passion for financial literacy.

So, if you have any feedback at all, we’d love to hear from you.

www.proliteracy.ca

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More Reasons to Change Banks

Last year I wrote about how my daughter got a Student Line of Credit, to help pay for her second degree, as a Chiropractor. Remember, I am the one that talks about being willing to change banks, but unfortunately, my daughter is changing banks due to the mistakes of the local branch of National Bank of Canada (which is the reason I changed banks a while ago as well).

The problems started when the line of credit was first set up, and has compounded since then:

  • It took 3 visits to get the student line of credit set up (we thought) with the local branch. Once the application forms were set up, the first application for the account was declined, because the young lady at the local branch was unaware of how to do the application, it was declined  because the application was asking for the entire value of the loan (for all 4 years of the school). There had to be a reapplication to get the loan set up (finally).
  • The Student Line of Credit was actually set up as a standard unsecured line of credit. This caused the National Bank head office to call (more than once, and somewhat irate) to ask why weren’t the minimum payments being made to the account? It then would take an hour of explanation, and investigation for someone to figure out that the account had been set up incorrectly (by the local branch). The only way it could be fixed was by the local branch, and they failed (more than once) to remedy this issue. The account should be set up so that the interest payments do not need to be paid until my daughter graduated (but yes, they still compound).
  • There was an inability to make payments from other banks to the National Bank for this loan. This meant all banking would have to go through the National Bank only (or use Interac transfers to do things). This is also a shortcoming with the CIBC Student Line of Credit.
  • The on-line banking at National Bank, never really worked correctly for my daughter, she had to keep calling their on-line help folks to get access to the account (just to see what the balance was on the account). This happened every time she tried to access the account, and each time she would ask, “So with the information you have just given me, I can get access to my account”, and the help line person would say “Yes”. It worked that time, and then the next time, she had to call back in, because it would not let her in.
  • The straw that broke the camel’s back was that the National Bank Head Office decided that the “ceiling” (maximum for the loan) for students in Chiropractic College (for their entire program) was  dropped by 33%, and because of this, the line of credit would not have covered the cost of the entire program. The reason for this change (we theorize) was that the Chiropractic College in Trois-Rivieres was consulted to see how much their program cost, and the maximum for the line of credit was lowered to reflect that program’s total cost. This is an issue, as my daughter is going to the College in Toronto (which has higher fees and costs). This meant my daughter had to change to another bank or she would have run out of money, so she is now in the process of changing to CIBC for her Student Line of Credit (and Free Banking too). There were inquiries made to the local National Bank branch to figure out why the Loan Cap was lowered, no real answer was given, just that it was being put in place, and that even though my daughter had been enrolled last  year, and the loan agreement included the higher cap, her cap was being lowered in accordance with the new rules.
Change your bank

Keep this in mind if you want to change your Bank

As you can see a great deal of frustration and confusion lead to my daughter changing her accounts over to CIBC. Naturally I was involved in the decision to change, as I am a guarantor on the student line of credit (or as Michael James would say, I have a Student Line of Credit). The change of the maximum loan limit was the main reason, but the other frustrations certainly made the decision to change, a simpler choice.

Remember, never be afraid to change banks, especially if you feel that you are not getting a very good deal. Also, this is why student debt is so darn high.

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Really Useful RESP Tips

A while back I was “interviewed” for an article that was supposed to appear in the Toronto Star, and you will be happy to hear that I am turning over a new leaf when being interviewed, I actually prepared for it!

RESP Piggy Bank

RESP’s Are Savings For Your and Your Child’s Future

Previously, if during interviews it sounded like I was talking out of my hat, I was, but things are changing. What happened to the article with the Toronto Star about Registered Education Savings Plans (RESP) I have no idea, but let me give you some of my notes that I had prepared, along with some links to some of my own thoughts on the subject.

  • Remember that there is a $50K Lifetime deposit limit
  • If you only deposit $2500/year, you will be under that limit, so maybe start with a larger lump sum to give it time to grow ?
  • If you miss giving up to $2500 one year, you roll $1000 of that limit to the next year
    Canada education savings grant (CSEG) is typically 20% up to $2500 deposited (can get higher for lower-income families)
  • If one child doesn’t use the money, you can transfer it to other children under the age of 21 (without penalties), but still can be transferred to blood relatives older than 21 ( there will be penalties there).

CLB – Canada Learning Bond

  • Little or no money needs to be deposited to get this, an initial $500 gets put in even if no money is deposited. Most banks are leary to do this, but talk to SmartSaver.org and they will help set things up (in the Toronto Area)

General RESP Advice

  • Start early, get your child a SIN, and maybe start with a larger lump sum to get things going (longer it has to grow, the better for you, remember the rule of 72 ).
  • If I had a chance to do it over again, I’d use a Self-Directed non-mutual fund bound system like TD Waterhouse, Questrade, BMO, etc.,
  • Beware programs that might have penalties on the principal, yes the CESG and CLB can have penalties if the child does not go to school, but you should get the money deposited back (and pay tax on the growth)
  • Invest in a simple couch potato portfolio with Index Funds or Index ETFs, no need to be aggressive here.

Tuition Costs

  • Acadia cost about $3800/term Trent is about $3500/term, so your RESP isn’t going to be able to deal with much more than Tuition costs, there are many many more costs associated with school.
    Most schools will show estimates of how much a typical year might cost (U of Waterloo, Trent and Queens do).

Alternate views

  • A lot of folks think their kids should pay for their education, but even if you only put $50 a pay in, it might help your kids start out? It is free money from the government.

As usual you can peruse my Registered Education savings Plan web page, which has a large amount of information on the topic. If you are interested in interviewing me see the About section of this site for details on this.


RESP Questrade Banner


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