Planning now for better opportunities for my daughter

April 20, 2006 10:59 AM

When it came time for me to think about where my life was going, my parents let me know a couple things: - they made enough money that the Canadian government wouldn't let them off the hook for helping to pay for my education, so student loans were reduced. - they weren't going to/weren't able to help me with paying for my education anyway. Consequently I never went to college or university. I've managed all right without any training or degrees, though not as well as I likely would have. I suspect I will never have time/opportunity/money to fix this. My daughter will be born in late June. What can I do now (in Canada) to make sure she has better opportunities than I did?
posted by Kickstart70 to education (23 comments total)

Well, the final post screwed the formatting. Yuck.

Here it is in better appearance:

When it came time for me to think about where my life was going, my parents let me know a couple things:

- they made enough money that the Canadian government wouldn't let them off the hook for helping to pay for my education, so student loans were reduced.

- they weren't going to/weren't able to help me with paying for my education anyway.

Consequently I never went to college or university. I've managed all right without any training or degrees, though not as well as I likely would have. I suspect I will never have time/opportunity/money to fix this.

My daughter will be born in late June. What can I do now (in Canada) to make sure she has better opportunities than I did?
posted by Kickstart70 at 11:00 AM on April 20, 2006

The most conservative way to plan for your kid's education is to pick a series of long-term government bonds and buy them over time such that they mature just before you need them and yield enough cash that you can pay for the college expenses.
posted by b1tr0t at 11:22 AM on April 20, 2006

We've been contributing to RESPs since our child was born - it allows the capital to accumulate interest tax free and also provides up to $400/yr in government grants.
posted by Neiltupper at 11:25 AM on April 20, 2006

This advice is specific to the U.S. and may or may not be applicable in Canada. Actually, I don't know if it's generally applicable in the U.S. or limited to some schools, but it's worth checking into:

When considering your ability to pay, colleges consider something like 35% of a student's assets and something like 10% of parents'. Therefore, it is in your best interest to have college funds/etc. in the parents' name(s).
posted by JMOZ at 11:27 AM on April 20, 2006

First off, as an independent person, you can do what you have to do to get back into school yourself. A lot of jobs have tuition reimbursement schemes, and educational loans for independent students have different qualification terms than were probably in place when you were a dependent of your parents.

If you get yourself through some kind of higher education, even a community college 2 year associate degree, you'll have a better base of life experience to put before your daughter when it comes time for her to make decisions about higher education. You may also create substantially better income opportunities for yourself, which will fall through to your daughter.

Obviously, setting up a regular savings program for your daughter's education, and staying on track with it for the next 18 years would help immensely in funding her ambitions at the time they come to fruition. Most parents have great intentions in this area, but only a single digit percentage actually ever do anything about it, because the goal seems so distant. But if you can put in just $500 a year, and take advantage of compound interest accumulation over 18 years, you'll be doing something concrete, that you clearly wish was done for you, but wasn't.

But seriously, get yourself back in school. I say this speaking as a person who took 35 years to complete my undergrad degree, at the ripe old age of 53...
posted by paulsc at 11:31 AM on April 20, 2006

First, congratulations!

If your daughter gets good grades, she'll get scholarship money. Plus she'll have a better chance of getting into college or university. So encourage her to make school a high priority.

RESPs, definitely.

If she can live at home while going to college or university, that'll make a big difference--in Canada, the cost of tuition is still much lower than rent.

I found the UBC calendar to be invaluable while I was planning for university, in grade 10 or 11. It'd probably be useful to have the calendars for your nearest university and/or colleges in your house when your daughter reaches that stage, assuming they're still available in print form.

Paul Krugman made an interesting prediction ten years ago. He thinks that in the long run (over the next 100 years or so), there'll be less white-collar work requiring a four-year university degree, and more blue-collar work requiring post-secondary training, but not a degree: trades, nursing, etc. So she may end up doing well if she goes that route instead of university.
posted by russilwvong at 11:45 AM on April 20, 2006

At the appropriate age, suggest that she participate in activities that would qualify her for scholarships?

Also, many of those things (like volunteering or music instruments, &c) are good things in and of themselves.
posted by PurplePorpoise at 11:55 AM on April 20, 2006

I agree. It's never too late to start making up for lost time. Do what you can to get back into school, if that's what you *really* would like to do. Don't let age stop you.

Congrats on your upcoming parenthood. Now you'll REALLY be getting an education!
posted by Taken Outtacontext at 12:19 PM on April 20, 2006

Pursue educational opportunities for yourself.
You can get a degree one or two classes at a time while still working and supporting your family. It's more challenging, and it will take years, but it has many benefits
- good for your brain to be learning new things and stretching
- good for your heart if you feel like you missed out on that formal education (the tone of your post suggests to me you might feel this way)
- looks good to your employers. Even before you finish your schooling, the fact that you are actively working towards something and obviously interested in self-improvement can help you get that next position/promotion/raise etc
- sets a good example for your kid. But doing it, even when it's difficult you're sending the message that it's important and worth working at
- takes care of you first. When you have a kid there's a temptation to put aside your own aspirations to put all your energy into them, but I don't think that's healthy. She should be allowed to do her own thing without ALL your hopes riding on her. When you take care of your own needs and dreams then you have more energy/love/excitement/ideas to give back to your kids.

Find money to save for her
Start as soon as she is born. Even if you can't afford a lot, put a little bit away. If you're creative, you can find lots of ways to sock away money for her. Some ideas we use:
- the money from returning empties (beer bottles, cans etc)
- everytime someone gives her a gift of money for bday, xmas, etc
- If someone asks what she 'needs' as a gift for whatever occasion, we tell them that she's well-equipped for toys (she is) and they could donate to her college fund. They're often happy to
- a tiny automatic withdrawl from our bank account every payday. We started with $10, and increased it when our means allowed it.
- If Harper gets his way and starts sending the $100/month baby bonus cheque, save that! Last I heard it was going to be taxable income, so you might not get to keep the whole shebang. If you're on a tight budget account for this, and bank only $70 of it or something along those lines (depending on your tax bracket). If you've got some breathing room, bank the entire $100, and pay the taxes out of pocket.

Even the piddly little amounts add up.

Remind youself that every dollar you can save the year she is born will be 3 or 4 dollars she doesn't have to come up with when she's 17/18/whatever. Compounding interest is a beautiful thing.

Invest that money somehow
Do not just let them money sit in a savings account at your bank. That's as good as sticking it under a mattress. Allow the money to grow somewhere. GICs offer security, but relatively poor returns (you'd probably keep pace with inflation, at least). Mutual funds are an option, but have some level of risk. Because she'll be needing the money in less than 20 years, you'd want to find funds that are weighted more heavily in more secure investments, and therefore subject to less volatility.

Good things about RESPs vs other savings:
- Tax sheltered growth. You don't pay tax on the earnings of your investment. She will when she withdraws the money 17 years from now. She'll pay at her marginal tax rate at the time of the withdrawl, which is likely lower than yours is now.
- Canada Education Savings Grant (CESG). The government matches a portion of your contributions, and that money gets invested and grows as well.
- Can be used for all kinds of accredited post-secondary education. Universites, technical colleges, films schools etc.

Go over the options with a qualified financial planner, who can give more detailed and more tailored-to-you advice than any of us can.

I have a three year old, we're Canadian, and I didn't go to University. Now I'm working to support my family & starting to work towards a degree one class at a time, so I can relate to some of what you're talking about here.
posted by raedyn at 1:10 PM on April 20, 2006

Start an RESP for your family (all possible kids, not just one). Set it up through the bank, which gives you access to several investments and doesn't charge as much as a scammy financial planner or RESP. Don't set it up with one of those RESP trusts, which will penalize you if your kid doesn't go to university.

You don't need to save as much as the pundits will tell you, if your child will live at home. And you might consider having your child pay part of her post-secondary tuition. Even $75 a month would probably add up to enough to cover two years, given a 3.5% interest rate and the RESP grant. You could then top it up and have your child earn a little. Of course, you can contribute up to $2000 a year and still get the RESP grant.

You can also encourage your daughter to start saving for university:

Summer after grade 10: 6 weeks x 20 hours @ $8= $ 960
Summer after grade 11: 8 weeks x 20 hours @ $8 =$1280
Summer after grade 12: 8 weeks x 30 hours @ $8 = $1920

Total: $4160, which is pretty close to a year of tuition.

(This is all in today's dollars.)

If she then worked in the summers between school years:
1st year: 16 weeks x 40 hours x $8 = $5120
2nd year: 16 weeks x 40 hours x $10 = $6400
3rd year: 16 weeks x 40 hours x $10 = $6400

Now imagine if you could subsidize that, so that she has a little money for books and transportation (and, if necessary, living expenses). You might also encourage her to work a few hours during regular semesters, so that she can have a bit of a social life.
posted by acoutu at 1:20 PM on April 20, 2006

Oh, and use your family allowance and any Harper Baby Bonus for the RESP, if you can swing it.
posted by acoutu at 1:23 PM on April 20, 2006

Agreed with acoutu's advice re: RESP "scholarship" trusts. If your kid doesn't attend university you get nothing. That's bull. With a proper RESP, if your kid doesn't use the money you can transfer it into the name of another one of your kids or roll it into your own RRSP.

But I disagree with acoutu's blanket assertion that a bank is better than a finacial planner. Just like any profession, there are good ones and bad ones. They're a regulated professional industry in Canada. You wouldn't just go to any doctor, right? You'd look for the most qualified one that you get along with and like their style. The same with planners. There's nothing wrong with going to your bank, but independent planners sometimes have advantages:
- they're able to sell you a variety of mutual funds, not just the ones from the bank they're at
- they tend to (but not always) have fewer clients in their book so more time for each one
- they may be more likely to have more advanced education in the field. Ideally you would use Certified Financial Planner.
This will vary from bank to bank and from planner to planner. Shop around. Recently I wrote a long post about what to ask a financial planner.
posted by raedyn at 2:08 PM on April 20, 2006

Raedyn: good points. If Kickstart can find a financial planner who offers no-load investments in a no-fee RESP and who can tap into a variety of vehicles (GICs, savings accounts, mutual funds, stocks, etc), then, by all means, go with the financial planner. My bank happens to offer all that, along with an in-house investment specialist with a CFP designation. And I can buy funds from a variety of institutions.
posted by acoutu at 2:14 PM on April 20, 2006

Sounds like you have a pretty good bank for investing with. Right on.
posted by raedyn at 2:51 PM on April 20, 2006

One suggestion: if you're just getting started with an RESP, start simple, by putting the money into five-year GICs at your local bank. To me, a 16-year time span seems a bit short to be investing in stocks or mutual funds, since they can go down as well as up; and the Canadian stock market is at an all-time high right now.
posted by russilwvong at 5:08 PM on April 20, 2006

I'm going to school on full scholarship, including living expenses, so that is definitely possible (check out Canadian Merit Scholarships and Canadian Millennium Scholarships, as well as the university's own scholarship programs).

My own parents didn't have much money to help me out with, but they emphasized the importance of university, and told me that I would get there no matter what, whether I had to take out loans or bank loans, or whatever. Just let your daughter know that you will support her in every way you can, whether you have the money or not. She'll be fine.
posted by stray at 6:15 PM on April 20, 2006

Talk to her early about your financial situation, whatever it is (unless you've got enough money to send her to Yale); the worst surprise of my life was finding out that, although I could probably get _into_ some pretty good schools, my parents couldn't/wouldn't pay for it. So I can kind of relate. I did get to go to college, but it didn't match my (admittedly nebulous) dreams. And I put myself through after my freshman year. In a major I didn't particularly like.

I think that, if I'd known I'd be pretty much responsible for paying my own way BEFORE my senior year in high school, things could have been different. As it was, finding out so late in the game was crushing.

If I'd known early enough that I'd need them, that I was in fact at a disadvantage compared to other college-bound students, I probably could have gotten scholarships. Maybe I could have let my teachers know that I needed help. Maybe someone would have given me useful advice, guided me into forming some kind of plan, mentored me.

My point, other than sounding like a spoiled child who did after all get to _go_ to college (a less-expensive "Institute of Technology" [not MIT] thanks to my SAT scores), is that if you _can't_ save enough to send her to wherever she wants to go, start early to help her figure out 1) what she wants, and 2) how to get there some other way.

It's already clear that she's lucky to have you as a parent; you're not being defeatist, you're asking how to solve the problem. It may or may not be possible just by your saving money. But it's definitely possible, working with your daughter to find creative avenues.
posted by amtho at 9:23 PM on April 20, 2006

raedyn writes "If your kid doesn't attend university you get nothing. That's bull. With a proper RESP, if your kid doesn't use the money you can transfer it into the name of another one of your kids or roll it into your own RRSP."

This is a key consideration. If my daughter takes up a trade or otherwise aquires a fully funded university experience we can redirect her RESP into our own education or even give the money to my sisters kids.
posted by Mitheral at 1:08 PM on April 21, 2006

And don't tell your kid or let them believe that good marks and a strong volunteer/community background will result in lots of scholarships. When I got to 12th grade in BC, I had a 3.9 GPA, volunteered for several organizations, had a part-time job, and had lots of leadership experience. My take of the scholarship pie? Less than $3,000 about 15 years ago, which was only enough for a year of tuition. My buddies who pulled down 4.0s and volunteered maybe 1 hour a month got about $5,000.

My recommendation to my siblings? Go for good marks, but no sense in aiming for perfect or near perfect when you can make more money with part-time jobs!
posted by acoutu at 3:31 PM on April 21, 2006

And don't tell your kid or let them believe that good marks and a strong volunteer/community background will result in lots of scholarships.

Sure, but good marks will help. UBC has a President's Entrance Scholarship which provides $4000 (about one year's tuition) for students with a 95% average, or $2000 for students with a 90% average. I assume other universities will have similar programs.

If you want to get lots of scholarships (which I did, 20 years ago), you need to be really strong academically, strong enough to be one of the top 50 or so students in the province. This qualifies you for major entrance scholarships, which will cover tuition and a good part of living expenses for four years. Not sure how important volunteer experience is these days; I didn't have any.
posted by russilwvong at 5:08 PM on April 21, 2006

Oh, it's not that you won't get scholarships. It's just that you may not get lots of scholarships. I was in the top 3% of the province when I graduated and I had oustanding performance on the provincial scholarship exams AND was also a peer tutor, peer counsellor, student council member, Girl Guide leader, service club member, drama club member, city theatre group volunteer, AND had a part-time job. And that meant $3k for me. Fortunately, I managed to keep up my marks in university and get other scholarships and awards later on, such that I graduated in the top 3% of my university class, too.

Russilwong, thanks for the UBC link. I vaguely recall that UBC and SFU decided to forgo their $20k and $10k scholarships in favour of distributing a decent amount to a variety of students. I think this is a much more fair approach.
posted by acoutu at 5:28 PM on April 21, 2006

No one actually knows what things will be like for Canadian universities in 15-20 years.

Tuition through the 1990s was still low enough that students could put themselves through university so long as they could commute from home (as many people at my university in Toronto did). I actually took out no student loans at all, but did take a year off between highschool and university to work part-time and then worked every summer. I paid for my tuition, books, bus fare, spending money and contributed to my family's rent and groceries in the last two years, and it wasn't that bad. (I had some small bursaries and scholarships as well - about $1000-3000 a year - but nothing large.) But this was predicated on my being able to live at home rent free for at least part of the time (I only started paying rent when my family was in financial trouble) - I was lucky in having two full universities within easy commuting distance.

But tuition has been going up, and I really don't know what will happen. In Ontario they had capped undergraduate tuition, but professional is now officially insane - it far out-strips what student loans even offer. This is actually a bad period, because tuition is hitting the level of American tuition, but the financial aid has not followed.

But in 15-20 years, things may be different again - tuition might stop growing, or maybe the financial aid system will change to match the new situation.

I know this has sounded a bit bleak, but most of all I would say not to give up hope - both my mother and I were convinced when I was 16 that I couldn't go to university because we couldn't afford it - it wasn't until I was about 20 that I realised I could go to the local university for much less. The fact that you are even thinking of saving now means that your daughter will have a better chance than you did (after all, if you make too much money then for herto get loans, I assume you will try to help pay for her university). But your committment to her is the most important thing. My mom couldn't afford to contribute tuition money, but she did support me (physically and mentally) for the four years I was in school and I wouldn't have gotten through without her.

If the RESP option works such that it can be rolled into an RRSP, that sounds like the best - especially with the government contributions. (My mother said she looked when I was younger, but then your child had to go to university before a certain age or you lost all the interest - as it was, I went at age 21.)

There are scholarships, but as other commentators have said they are very very competitive, more so than in the US (because Canadian unis have less money, and give out more small scholarships). My university gave out about 5 full scholarships a year, for a student body of 50,000. (Now I have to boast, but it makes a point) I actually tied for the highest GPA in my year at the end of my first year, but I had had only a small scholarship of $1500 coming in (for good but not stellar marks - in Canada, 90s are much less common than in the US). That's not to say not to volunteer - I volunteered in highschool and got my first job (in a restaurant) because of it, which helped to pay for university. But it's best to volunteer out of interest, and work for money for university - volunteering in the hope of catching a scholarship is a gamble, and devalues volunteer work.

Sorry this is so long - to sum up:

a) if you will be living near a university (any big city in Canada, and many smaller ones), current costs are not prohibitve - but the future is unknown, so be prepared for tuition to possibly continue to go up

b) if you don't live near a university, your family will need to save more to pay for room and board, but it is possible to save, and your daughter will either qualify for student loans or have help from you, which is what really matters
posted by jb at 2:30 AM on April 23, 2006

Nb. I did volunteer because I believe in volunteering. However, I was told the amount and quality were important. Meanwhile, the people who got full rides volunteered at most one hour a month, meaning it was easier for them to pull down a 4.0. All the stuff my principal said about being well-rounded turned out to be false.
posted by acoutu at 9:57 AM on April 27, 2006