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Paying with plastic for your child's education?

Parents are struggling to find ways to help their children pay for education, with some even pulling out their credit cards to cover the costs.

A new Environics Research survey for TD Bank shows that while 87 per cent of Canadian parents plan to pay for all or part of their children's higher learning, many don't have a solid plan for how they will do so.

Of the parents who plan to contribute to their children's post-secondary education, 10 per cent said they will handle all the expenses, 48 per cent planned to cover "most" of the costs, and 29 per cent said they will pay for the essentials only: tuition, books and rent. Twelve per cent of parents said it would be a good experience for their children to pay their own way.

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While all the parents surveyed said some form of higher learning is important, 26 per cent said they have yet to start saving and 15 per cent said they have no idea how they will finance their child's education. One in 10 said they plan to use either credit cards or their line of credit.

. Weigh in on whether you would stash some extra money into an RRSP, RESP or a TFSA.

"A lot of times, planning for post-secondary education is something that falls second in the list of priorities given the day-to-day burden on regular finances," says Lawrence Engel, vice-president of personal lending at TD Canada Trust. "Often it isn't until it's too late that they realize they're only a year or two away from their children going to university, and at that time is typically when the panic starts to set in and they start to look at ways of how they're going to finance things."

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According to a 2009 TD Economics report, the cost of a four-year undergraduate degree was more than $80,000 for students living away from home, and about half that for students living at home.

For their part, students are not shunning their financial responsibilities when it comes to their education. In a separate survey of 1,000 Canadian students, half said they are working this summer to help pay for school. However, two-thirds of them said they will not earn enough to cover their expenses. These students said they are relying on student loans or lines of credit (44 per cent) and Registered Education Savings Plans (27 per cent) to help them through school. Not surprisingly, two-thirds of students expect to be in debt when they graduate, with 30 per cent projecting they will owe at least $15,000.

There are non-monetary ways that parents can help their children through school, says Mr. Engel, a father of two girls aged 7 and 10.

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Investor Education: RESPs

  • How does the Canada Learning Bond work?
  • Chapter 1 : What affects how much my Registered Education Savings Plan pays?
  • Chapter 2 : How can the government help me save for a child's education?
  • Chapter 3 : What will it cost to have an RESP?
  • Chapter 4 : What happens to the money in my RESP if plans change?
  • Chapter 5 : What happens if I close out my RESP?
  • Chapter 6 : What do I need to know about the risks of an RESP?

For students living away from home, parents should prepare them for the sorts of costs they can expect, including transportation, food, rent, utilities and entertainment.

"It's very important to sit down and start working through what a budget might look like for the child. Most students going to school have never had to worry about actually planning what their monthly cash flow is, so getting a good understanding of what some of the fixed and variable expenses are is absolutely critical."

Parents can also help students learn how to save money by researching student discounts for such things as transit, entertainment and bank fees, as well as exploring ways to pool costs with other students. And don't forget to check out the scholarships, bursaries and student loans offered by schools, the government and your financial institution, Mr. Engel said. (For help finding student financial assistance, read Show me the money.)

But first and foremost, begin saving now, he urges. "The earlier you can start to save and take advantage of things like RESPs and Tax-Free Savings Accounts, the better off you are."

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About the Author
Report on Business Community Editor

Dianne Nice is community editor for Report on Business and writes about social media. Previously, she was The Globe's online editor for Careers and Personal Finance and has written about these topics for Report on Business and Globe Investor. More

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