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There's an education to be had in personal budgeting.

by:
Laurie Campbell

Going back to school is getting to be a very expensive proposition. These days the average Canadian family’s budget can take a pretty big hit covering costs for a college or university degree. Statscan reports that on average, post-secondary tuition fees alone amounted to almost $5,600 per student in 2012-13. That’s up five per cent from about $5,300 a year earlier. On top of that, there are books and living expenses to consider in most cases, adding thousands more to the annual tab for each youngster and increasing the possibility that their parents will need credit counselling to help consolidate all the costs and/or debts.

Now a recent article in the Globe and Mail on debts reveals how education costs will influence money management in the future. If you’re a young mom and dad with plans today to send your babies to university, you can expect to spend about $44,000 on tuition alone come the year 2031 (based in indexed growth of four per cent per annum from 2013 onward). And as to adding living expenses to the tally (you should be sitting down for this), the Globe and Mail calculates that you can expect to spend well over $100,000 per child in 18 years time to cover tuition, housing and other fees (again based on indexed growth). We’re talking annual tuition increases approaching four per cent over the last decade, even though inflation has been hovering between one and two per cent.

Since the early 1990s, college and university tuition costs across Canada have increased more than threefold. But of course there’s solace for parents who extol the virtues of complete self-reliance on the part of their children. Let the kids themselves worry about gathering coin for their educational hopes and dreams. In which case, if all the calculations for the future are correct, you’d better start prepping the kids early for long hours of part-time work and a steadfast approach to personal budgeting and savings.

Already on average, post-secondary students graduate with a student debt of $27,000. Some pre-emptive credit counselling may be in order to avoid these kinds fo crippling debts. Today, the total tab on average for a four-year university degree runs to about $60,000 factoring in tuition, boarding, books, and other expenditures. Of course, a large majority of parents in Canada don’t want their kids to carry all the weight of educational financing on their shoulders. Particularly nowadays, with a tighter economy and job markets growing more challenging for students, parents feel responsible for easing the load so their kids have a fighting chance to get out into the world and make something of themselves. As the Globe and Mail points out, 83 per cent of parents in Canada expect to cover costs for their kids’ post-secondary education, while 44 per cent expect their kids to also pitch in.

Under the circumstances, if you’re a young parent right now looking into a baby’s or a toddler’s eyes wondering what career promise might lay ahead for the wee one - and what fulfilling that promise might entail financially - the Globe and Mail offers some great credit counselling tips. Gathering wisdom from Bank of Montreal Senior Manager Chris Buttigieg, the newspaper notes that the first and most important thing parents should remember is to start saving early for their child’s education. Buttigieg says saving early means parents can take full advantage of compounding returns on their investments. AC “He cites the example of a parent who contributes $2,500 per year for 12 years, for a total of $30,000. Assuming a five per-cent return on investment each year, that money will grow to $55,992. That compares to a parent who saves $5,000 per year over six years – the same total of $30,000 – but who would see a smaller return of $35,391, based on the same five per-cent annual return rate,” says the Globe and Mail. The Globe also makes brief mention of tucking away money through Registered Education Savings Plans (RESPs), which offer compound returns with tax advantages. As well, contributions can earn a 20 per cent (or more) government grant.

You’re wise to get details about RESPs – and other investment tools - from a qualified financial advisor as you map out a savings plan. Need I remind you, dear reader, of how many times I’ve offered credit counselling here that in matters of budgeting, saving is everyone’s saving grace. In relation to your child’s future education, I’d even call it heavenly grace. After all, it could give your child wings.

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