Students walk through the bus loop at the UBC Vancouver campus on March 26.Isabella Falsetti/The Globe and Mail
Universities and colleges are sending out acceptance letters and students across Canada are deciding where to go and what to study. It’s an exciting milestone in their journey to adulthood.
It’s also a huge expense and now is the time to engage your teenager in the conversation about how much it will cost and how it will be paid for. Understanding the extent of this financial investment will help ensure they make the most of their education.
In some families, the student is responsible for funding their education. In others, parents pitch in to fund some or all of the cost. But even if all expenses will be covered, having an in-depth conversation about money is important.
The all-in cost of attending university away from home in Canada starts at about $25,000 a year, making a four-year degree a $100,000 commitment. That’s based on data I gathered from four Ontario universities and includes tuition for an arts program, housing, food and student fees.
As parents, we understand just how expensive this is. For a teenager, this number has less context. Provide that context. How much is this relative to your family’s yearly spending? Your mortgage payments? How much is it compared to your income?
Sit down together and break it down. Tuition, housing and food are the biggest costs, making up about 85 per cent of the total. Add in other expenses such as activity fees, books and supplies, travel to and from home, and fun money. There is some flexibility in some of these expenses and your child’s choice of where to go to school can make a difference.
Tuition varies from program to program and can add thousands of dollars more each year. For example, an engineering degree is about $5,000 more per year than an arts degree, adding $20,000 over four years.
Consider too that some universities have higher tuition than others – rates at universities in Nova Scotia, for example, are the highest in the country with a 36-per-cent premium over the Canadian average, which adds almost $10,000 a year over four years.
How far away from home the university is located is also a consideration. If they want to study in another province, add in the cost of flying, or taking the bus or train for trips home. Many schools also charge a slightly higher tuition for out-of-province students; Quebec currently has the biggest premium, although this could change soon.
Rents will vary depending on location, so plan for expensive housing in Toronto and Vancouver. Bearing in mind that leases are often year-round – and not just for the eight-month school year – an extra $200 a month in rent is $2,400 year or $7,200 for three years (assuming they live in residence in their first year). Going to a local university and living at home is of course the cheapest, but this isn’t always an option.
Once you’ve established the costs, dig into the details of how it will be paid for. Disclose how much you are able to contribute. This might include funds in a Registered Education Savings Plan, other savings you have, and how much income you can contribute each year.
After this baseline is established, if you have a deficit – and many families will – discuss other ways of managing the expense. Are there grandparents who can chip in? Scholarships can also help. For most students, they won’t be a game-changer, but a few thousand dollars can make a difference.
Your child’s summer job is another key contributor. Before the summer starts, set a goal for their summer savings. Maybe you will agree that they will be responsible for their spending money. Estimate a weekly budget and extrapolate it over eight months. Having $100 per week of pocket money is $3,700 over eight months, a reasonable goal.
Have a conversation about whether they will work during the school year. For some kids, it’s doable, but it can be tough, especially in their first year as they find their feet.
If after adding all the costs up you are still short, you may need to fund the rest with student loans. Whether your child will qualify for federal and provincial loans depends in part on your family income. In the event they don’t, you might find yourself turning to the banks.
Involving your teenager in the details of paying for their education is invaluable. It will give them motivation to take their studies seriously, involve them in managing the costs, and is one of those excellent life lessons about managing money.
All that said, keep it as stress-free as possible, providing solutions and options so that they can see a path forward.
Anita Bruinsma is a Toronto-based financial coach and a parent of two teenage boys. You can find her at Clarity Personal Finance.
