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Student Debt (Epilogue)

Is there a right way to deal with the question of whether a parent should pay for a child’s post secondary education or whether the child should be left to pay for a University Education (and left with a large debt load in student loans)?

I think that is a pedagogical question since most of the times the parents financial situation is what dictates how much parents can help their children who want to get a post secondary education. I find it rare that parents who can help their children with their post secondary education, don’t help out in some fashion or another. I do know of some children who have refused help from their parents, out of pride or other reasons, but that is a rarity as well.

Some of the comments I have received have been very interesting, and I want to thank all of my reader’s who contributed (and those who de-lurked for me as well).

  • A large number of comments agreed with my opening statement that it is very rare that parents who can help, choose not to help out their children who choose to try to get a University Education, it usually comes down to whether the parent is in a position to help or not.
  • Michael James commented:

    I plan to pay for the basic necessities for my kids initially, and am hoping that they earn enough to take over by the end. I’m not paying for any extras, though. Meal plan, residence, books, and tuition are necessities.

    I think that point of view is a healthy view point, and fair. The extras he comments on, I think are part of the “College Lifestyle”, but then again, should a parent be expected to pay for them?

  • Trent commented:

    And I would say emphatically, if the student in question never had a job during high school, then I think you would be doing a great disservice to them by allowing them to wait until they graduate college before punching their first clock.

    Which is very much the “Christian Work Ethic” espoused by many parents and grandparents. I think I agree with that comment as well.

    As a personal aside, I worked delivering Telephone Books one summer, loading trucks another summer and had a paper route from age 13, so on those days at University when I thought, I am going to chuck this whole thing and get a “real” job, I just remembered heaving bundles of Penthouse into the back of Grumman delivery trucks in 30 Celsius heat, and it was amazing how well it motivated me.

  • Nerd Money Commented:

    I think one possible solution in terms of funding is that you loan out any funds you’ve set aside for their education. Set it up like a government funded loan where there’s no interest while they’re in school and then a modest interest rate payable to “The Bank of Mom and Dad” six months after graduation.

    Interesting concept, that I don’t know if I agree, but it is another way to teach the value of the money spent on the education (remember the infamous Singing Horse parable for possible pay back solutions).

  • Steward’s of Wealth had another perspective:

    We don’t have kids. But one thing that we will teach them is how money works. One of our goals is to teach them how to invest. Hopefully, by the time they get to college, they’ll already have assets paying for tuition.

    Didn’t really say if they were going to help or not, and unless my kids find a penny stock to invest their funds, it’s less likely they’ll be able to pay off their tuition, but a worthwhile learning experience, although what happens if they invest badly (like I would have)?

  • Nancy (aka Money Coach)’s comments really hit home for me:

    I was driven, got the A’s but it wasn’t nearly the experience it could have been if I had been funded. Then I graduated with a debt that took 10 long years to pay off, and significantly hampered my ability to get ahead (and most readers know the effect of compound interest = opportunity cost for me).

    I read that and understand more what the costs of Student Loans can do to newly graduated students.

  • Amy (my de-lurker) comments were again very good:

    I graduated with a BA in 2003 with very little debt. I worked like crazy every summer (maybe taking 2-3 days for a camping excursion with friends every summer but that was it). I also worked most Saturdays during the school year. Seeing as I attended a Christian university here in Ontario, my earnings didn’t stretch as far as I would have liked, so I applied for DadSAP:) My parents were in a position to help me out, and I’m very grateful for that. I gave all I could towards my education and my parents paid the rest.

    DadSAP == The Bank of Mom and Dad, but it’s the same idea. Any child who works hard and realizes that as the oldest they need to help their parents because their brothers and sisters will want help too, is ok by me!

  • Another interesting comment I got from an acquaintance who has many kids (more than 7 I believe) who told her kids, “You are going to University, Your Parents aren’t going to be able to Help, but You are going”. I think if kids are aware of the ground rules early, they are more likely to figure out what they need to do early on as well.

Thanks to all commenters and readers, this was an excellent bit of research for me to understand how other folks view this dilemma. I am lucky to have gotten my scholastic ride for free (as it were), and hope to help my kids as much we can.

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University, Who Pays ?

This is a topic that my family has been talking about, and I suspect this is not just a one post topic, so it may stretch out over the week, as student debt is an important topic.

In my case I was very lucky in that my parents paid for my education, and I graduated (in 1986) with no student debt (which is depressing knowing that all of the debt I carry now is of my own making, but that topic is really an underlying thematic premise in this journal, so we’ll leave that one aside for now).

My parents and many friends of mine, had to pay for their own education, or finance their education themselves at least. What are the pros and cons of all of this:

Pros of Having Child Pay for Education

  • A sense of ownership and responsibility can be instilled in the student. If the student is the one who has paid for something, the student is much more likely to value their education that much more.
  • A higher degree of pride in the accomplishment of “doing it yourself”, and being self-made. This may not necessarily be true all the time, but it can be a powerful motivational factor in later life. Knowing you can accomplish goals is important, and this is a very large goal.
  • At 18, this child is learning the value of money and the value of the education they are earning. Of the people I know that “did it themselves” they have a very good understanding of money and also how to live on a budget.
  • Co-operative programs are available at many Universities and this can be a way to pay for an entire education (or most of it) and they get worthwhile job related experience at the same time.
  • If a student takes care of their own school expenses, they are not burdening their family with these costs. This can be a point of pride (and is for a lot of the people I know who paid their own way).

Cons of Having Child Pay for Education

  • Students graduating with crushing debt loads, which will drag on their early adult lives. These debts can cause a great deal of consternation and angst in young people’s lives. Sometimes these debts cause a sandy bedrock to build upon, causing more issues later in life as well (financially).
  • If a child has to have a part time job during school, can they truly concentrate on school full time?
  • A degree can take longer, if there is a need to do a part time job, and thus not be able to take a full course load (or worse, your job causes you to fail courses). Longer period of education, means more costs, means more loans?
  • Can the student truly experience the University experience if they are constantly worried about money? (some might argue that in fact, that point is part of the entire University experience (I tell stories of Kraft Dinner being 4 boxes for $1.00, when I was at school)).

So is it better to help or pay for your kids post secondary education? Let’s ask tomorrow.

Follow ons:

  • Student Debt Part 2 with more direct discussion on the subject
  • Student Debt Epilogue which wraps up the subject

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The High Cost of Healthy Kids? (part ii)

Yesterday I introduced the topic for the rest of the week, The Cost of Raising Healthy Kids. I naïvely summarized all that needs to be done into 4 simple categories (no, I am not saying this is all you need to do, but it is easier to write about this way). I will try not to argue the health issues, however, I will argue the financial aspect of these 4 concepts.

Make sure the kids are active at school in sports

When I was a kid, school sports and Gym was where you got in shape and where you stayed in shape. Good things like the Canadian Fitness Test and intramural floor hockey were staples for me to get my exercise during high school and I really enjoyed myself. As has been pointed out a lot of road hockey helped during the summer as well.

Do kids today have this kind of access? Kind of, governments are starting to figure out that maybe it would be good for kids to have Gym more often and make it mandatory for more of their academic career and that I applaud, and think it is a good idea.

Intramural? That depends on whether the school has teachers and/or parents willing to help run these programs, and I would bet there are some schools that either don’t have the equipment or volunteers to do it either.

In I Thought Public School Was Free? I outlined some of my costs of having kids on the competitive teams at their High School. Now I know at my kid’s school if there are kids who want to play that can’t afford it, there are attempts to help them out, but the kids’ parents have to be willing to ask for help as well. Having kids in these kind of activities no longer simply consist of buying them a pair of running shoes, it is some major moneys, and that is for school teams.

Sign them up for sports at home in their spare time

I do this for my kids, because I believe that if I left my kids to their own devices, they’d get into trouble (idle hands are the devils work, for lack of a better explanation).

My daughters play basketball, where if they play for in the house league this will cost about $150-$200 (and shoes another $100 or so). Most of these leagues will offer financial help, again if the parents ask for it.

If my girls make competitive teams, now we are going up a level in costs, double the team fees to pay for tournaments, and league dues. Shoes and such are the same cost, however, now they travel out-of-town 2-5 times over 7 months, where I have to pay to get them there, to stay in a hotel and to feed yourself. I budget at least $1200 for this (per child), which is conservative.

What if my daughters played hockey? In the words of Paulie Walnuts in the Sopranos, “Fugget about it!”, that is another level higher, just for house league, and if my son wants to play, it is even more insane. I won’t quote numbers, because I really don’t know (if anyone cares to comment, please feel free to enlighten, or shock us).

If your child (or children) play more than one sport, this is all additive, remember. Yup the Government has introduced a $500 write off for active kids (per child), which is very welcome, but it does not stop me from spending the money, and $500 is a small portion of the money going out as well.

Yes, I willingly pay this, because I think my kids want to do this (I do ask, “Are you having fun?”, because if they aren’t why am I paying this much money?), and because I think it is important too, but if I didn’t have the money to pay for it, what would my kids be doing?

Tomorrow we tackle:

  • Limit their TV and Video Games
  • Limit their intake of junk food

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The High Cost of Healthy Kids? (part i)

I have seen many articles posted lately in the “real” media complaining about obese kids and the implication that it is their parents fault that they are fat. I agree in some ways given that you as a parent should worry if your kid is morbidly obese, or way over weight (also knowing that some kids fill out and then shoot up in height, and there are sometimes extenuating health issues). Parents should most definitely be worried that their kids are not healthy, no argument there.

What I will write about here, is how the “real” media implies that it is a simple case of parents just not trying to get their kids healthy, and the simplest resolution to the problem is:

  • Make sure the kids are active at school in sports
  • Sign them up for sports at home in their spare time
  • Limit their TV and Video Game access
  • Limit their intake of snack foods and foods high in sugar and fat

Simple enough, and in an esoteric way, I agree, however, let’s look at this from a financial model.

The question to be answered is: is it cheaper to have healthy kids, or is it more expensive? I’ll give my opinions in the next couple of days.

New Month Coming

September is on the event horizon folks, that means we are in the final third of the year, maybe it is time to revisit your financial plans, and also start thinking about big ticket end of year items that could broadside you if you don’t think of it. What do I mean?

  • Christmas, better figure out what you are doing there, or you may as well get a pile of money and burn it.
  • When do your insurance policies renew?
  • What other yearly payments might come due on January 1? Do you have enough money to pay them?
  • How about your RRSP input goals? Reached them yet?
  • RESP Goals?
  • Savings in General?

A good financial plan is a living, breathing entity, that you must attend to monthly.

Follow On Stories

I wrote two follow-up stories that  you can also read:

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I should divorce my wife?

Note the date on this one (2005) . An interesting rant on my part about how the Tax System seems to be slanted towards dual income families.

I read that one on the Alan Baggett news site. I scratched my head but it was actually how the tax system works. If I divorced my wife and pay her Alimony (not child support, remember that case a while back, where that is taxed in the payers hands). I can effectively split my income.

I remember having this argument that in the Government’s eyes the following scenario would be ideal:

  1. Divorce my wife, and pay her half my salary as Alimony (thus sharing my income)
  2. Have my children live with the correct Parent. This might enable them to claim the Child Tax Credit and Ontario Tax Credit
  3. Rent my wife an apartment in the basement of my house (with its own separate entrance).
  4. Have my wife take care of the kids (as daycare). Write off the money I pay her on my income as well . She does it in her apartment, so she write that off.

Yes, this is a ridiculous scenario (and I’m sure some might even claim illegal, although I’d love to see that taken to court), but this is how obtuse the entire Canadian Tax System is! I checked this with Quicktax and it was quite happy to show me the obscene amount of tax I’d save.

Alan’s tax bible is an interesting read, as are his stories (they are a little “he said, she said” which at times I am not fond of), but still interesting to read how some people are persecuted by the Tax system, while others get off “scott free”.

I do not condone the above tax shenanigans.

Follow On Stories

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