Five Questions to Ask Yourself Before Paying for Your Child’s Education

Most Canadian parents are aligned when it comes to education for their children. In fact, according to a recent survey, 97% of parents in Canada with children as young as 9 want their children to achieve a post-secondary education.¹ So it’s not surprising many parents want to help cover the increasing costs of post-secondary school.

But the question is: Should you be the one paying for it? Before you commit yourself — and your savings — to funding college or university for your kids, here are 5 questions to ask yourself and the rest of your family.

1) Are You Leaving Money On the Table?

Before you jump in to pay for school, have you and your child(ren) looked at all other funding options? Now is a good time to do some research into scholarships and grants they might be eligible for.

While scholarships are typically based on merit, grants and bursaries are often awarded based on financial need or other considerations. Encourage your child to speak with their guidance counsellor and/or financial aid office, to see what might be available.

There are also some very helpful websites (such as scholarshipscanada.com and studentawards.com) that provide a database of scholarships, and match students to those scholarships that they may qualify for.

Keep in mind that not all scholarships are based on academic achievement — if your child is an active volunteer, leader in the community or sports star, there might be a scholarship for them even if their marks aren’t top of the class. For more tips on seeking out scholarships, grants and bursaries, check out this article.

2) Are You Saving Enough for Retirement?

Before you offer pay for your kids’ education, it’s important to understand whether you’ll have enough money set aside for retirement. Even if you’re diligently saving for retirement, consider:

You may not get to decide when you retire. In fact 43% of Canadians recently surveyed didn’t choose their retirement date.²

You might not have enough time to make up lost contributions if you decide to fund education over retirement. Look at your plan carefully to see if it can handle a break in contributions.

Your children, on the other hand, have years ahead of them to pay back money borrowed for education. While you don’t want to set them up for a heavy debt, they do have time on their side. Your retirement, on the other hand, might be fast approaching. It’s not an either or situation, but it means thinking about how to balance your objectives.

3) Will You Incur High Interest Debt to Cover This Expense?

If you don’t have funds set aside now to pay for education, will you have to borrow? If so, will you have to make use of high-interest credit, such as credit cards or higher interest loans? It’s important to realize that if your children cover the costs of education, they have access to student loans and lines of credit that typically carry a much lower interest rate than most credit you could leverage. In most cases, student credit lines require a parent or someone else to co-sign as a guarantor.

Plus, these student options tend to have flexible repayment terms that consider a student’s income during and after school. The credit you have access to would likely be subject to standard interest rates and terms.

4) What Lessons Can Your Child Learn by Covering Some Costs Themselves?

What if your kids have some skin in the game when it comes to paying for college or university? Many parents in fact want their kids to cover some of the costs, as it helps them stay focused in the face of other distractions, and provides great lessons for saving, budgeting and the value of money.

5) What Options Work for Your Family?

Remember, all of the funding for post-secondary school doesn’t have to come for one single source. Is there a way your family can work together to cover these costs? Consider a matching program — i.e. if your child pays for the first term, you cover the second. Or, you can match whatever dollar amount they can come up with to get to the total funds needed.

Another way you can share the cost is to agree to pay a set portion of the expenses while giving your kids the responsibility to fund the rest — either through savings from summer jobs and/or student credit options. You can also encourage grandparents and other family members to pitch in, in place of other birthday or holiday gifts.

There’s no question you want your children to succeed, and it’s natural to want to help out however you can. It’s simply important to consider the overall impact that funding this significant expense might have on your family as a whole — as well as the benefits that may come with exploring the other options available to you. A large part of this process is understanding how much your child’s entire education is going to cost. Use this Student Budget Calculator to help estimate how much money they will need to pay for their entire school experience. And always seek out advice from financial experts if you need it.

^1. Source: Assessment Matters!, Council of Ministers of Education, Canada, No 4, 2013.

^2. Source: 2015 RBC Retirement Myths & Realities Poll

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