Article written by Jennifer Black and Dedicated Financial Solutions.
Education: Who should pay for it?
Educating young people in financial literacy and responsibility should start at a young age. It is the parent’s responsibility to set the groundwork for how their children manage their money. As a Senior Financial Advisor at Dedicated Financial Solutions and Manulife Securities in Mississauga, Ontario, and a mother of two, I have first-hand experience in developing a strong financial foundation for my children.
Building a foundational knowledge in handling money has to start long before students move on to college, university or the workforce. High school is the ideal time to help children create a budget discipline however, the earlier a parent begins educating their children, the better. At a minimum, teens should be expected to put some of the money they receive from any work, allowance or gifts towards their discretionary spending. It is also important for students to put a percentage of every dollar they receive towards savings, too.
Even when parents can cover many of the costs during post-secondary schooling, it’s a good idea for students to pay for a portion of their tuition. When you put some “skin in the game”, it gets them to take some ownership of their education. Students that have responsibility for expenses that they will have when they’re on their own, like phone bills, Internet, and gas, helps build their appreciation for proper fundamental budgeting.
Ideally, the ability to work will depend on a student’s schedule and course workload, with academics as a priority. Part-time work, budgeting debt, tracking spending – it’s all part of sound money management for students, and it all comes back to the parents’ lessons about finances.
To create more financially literate young people, parents need to be better educators, be open about finances in the household, and make responsible financial decisions themselves. Money is one of those things that is not typically discussed as much as it should be between family members. It is important to have those conversations in order to set children up to be more aware and responsible, thus fostering successful money management habits.
There are four possible scenarios that can be used when dealing with the financial responsibilities of children that are pursuing post-secondary education:
1. Parents pay for everything
2. Kids are told they have to pay for everything and they can work a part time job, a summer job, and get student loans or even a scholarship to cover it.
3. Blended – Recommended. Parents pay for most of the expenses like tuition, books and rent but the kids are expected to pay what is needed for their discretionary items. By forcing the kids to manage their money daily and to pay for their “want” items, they will be required to budget and will learn to live on a budget which will prepare them for the real world.
4. If parents really want to pay for everything and want to help out as much as possible, they should still see what student loans are available. There is the option of telling kids or not, but, if the parents help out and still have the kids get student loans, they can always pay them off once their child graduates. Approaching it in this way will provide motivation for the student to actually focus and do well because they think they are paying for everything themselves.
There are many different options for helping your children and supporting them through their post secondary education. To review your situation and determine which option will work best for your family contact us today.
Or to read more information on this topic click here to see Jennifer’s interview with the Globe & Mail about funding kids education.
