Should I Help Pay for my Child’s Education? (Part 1)

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The cost of education is continually rising with an average tuition increase of 3.1% across Canadian universities for the 2017-2018 academic year. So should you be helping your child pay for their university education? In this three-part series, we’ll take a look at some of the advantages, disadvantages, and my recommendations when it comes to helping your children. As much as you’d like them to be independent once they turn 18, we’ll start off today by taking a look at some of the reasons you should consider helping with the cost of education.

Avoiding Student Debt

By not helping with the cost of education, your child could very well have a black cloud of debt hanging over their heads on graduation day. Starting their working lives with a debt payment can severely set them back regarding other goals they may have such as owning a home or saving for retirement. Even with an excellent job out of school, having a debt payment can hamper their ability to qualify for a mortgage. With home prices continuing to climb, they may be priced out of the housing market once their student debt is finally paid off. The effects of debt are even more impactful when it comes to saving for retirement. Due to compound interest, delaying retirement savings for even ten years will impact their nest egg by tens of thousands of dollars upon retirement. Is that a position you want to put your child in if you can help them out today?

Employment and Earning Potential

There are many statistics which indicate the rate of unemployment to be a lot higher amongst high school graduates as compared to university graduates. There was also a study produced by Statistics Canada which indicated that men with a bachelor’s degree would earn 1.7 times more over the course of their working careers as opposed to men with a high school diploma. The results are even more significant for women, where they would earn 2.1 times more than their high school diploma counter-parts. By helping to pay for your child’s post-secondary education, you will help them better position themselves for higher earning positions over their lifetime whereas they might skip university altogether if they needed to foot the bill themselves.

Focus

School can be a very stressful experience and having your child’s education paid for, gives them one less thing to worry about. They can focus on their education and GPA rather than how they’ll make next semester’s tuition payment. Not having to take on a full-time job to pay for school will also allow your child to complete their education sooner. They’ll have the ability to take on a full course load rather than having to juggle work, life, and night classes. The sooner they can complete their degree, the sooner they can get started on their careers and hopefully pay you back a portion of the costs 😉

These are all great reasons to help out your children with the cost of university, but stay tuned for my next post where we’ll examine some of the downsides of giving them a free ride through school.

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Marc Sabourin is a Winnipeg-based Financial Advisor and Retirement Specialist with Harbourfront Wealth Management. His specialty is working with pre-retirees and retirees who are looking for retirement, investment, & tax advice. 

Disclaimer: The views expressed are those of Marc Sabourin, Certified Financial Planner, and Investment Advisor, and not necessarily those of Harbourfront Wealth Management Inc., a member of the Canadian Investor Protection Fund