Monday, September 11th, 2017
It's hard enough for many parents to have the money talk with their children and help them create a solid financial footing. But once they're university-bound, how do you keep financial lines of communication open without feeling like Big Brother?
Learn About Debt
Debt, and keeping it in check as much as possible, is essential because the burden can hinder your child when they finish their studies and enter the job market.
According to the Canadian Federation of Students, students who receive funding through the Canada Student Loans Program (CSLP) are graduating with an average loan debt of $28,495. It's estimated that the outstanding student debt owed to the CSLP alone is over $16 billion, as of 2013.
Not only that, but according to a 2015 CPA Canadian Finance Study, respondents almost universally (98%) agree that it's somewhat or very important for youth to learn about managing money before they enter the workforce. However, an overwhelming 88 percent are looking to their parents for that education and only a distant second and third to their schools (45%) and government (26%), respectively.
What Can Parents Do?
How do you ensure your child isn't struggling over finances while they're away studying?
"Ask, ask, ask and ask again," recommends Shannon Lee Simmons, CFP and founder of the New School of Finance. "Checking in with your kid about finances is important. First, it normalizes the idea that talking about money is OK. By checking in regularly, you give your kid an opportunity to talk on their terms. Stay away from over-monitoring. Don't ask to see bank statements or credit cards, unless you share them. This can breed resentment on both sides and perpetuates the idea that they aren't capable of managing."
Gary Rabbior, CFEE President and CEO and author of Money and Youth, has a suggestion for parents. "Notify their kids when payments are due on credit cards, rent, utilities and more so they don't miss payments or have to pay late charges," he says. It's a gentle nudge that even some parents could take note for their own finances.
Rabbior also suggests helping them "resolve issues that can arise when expenses are being shared among students living together. Help them prepare a budget and accurately estimate expenses and keep in touch see if they are following it or need to adjust it."
Becoming an Adult
Keep in mind there are very adult issues that arise as soon as your child starts earning an income—and they may lose track of them during their studies. The most significant would be tax time. Rabbior urges parents to work with their adult children. "Prep them for preparing and submitting taxes, to make sure they file taxes and to assist with possible tax credits they don't know about, or pay any taxes due."
Simmons adds: "If you're able to and want to help your child financially, do so on a structured budget. Let them know what you can afford to give well in advance. Then they don't feel guilty asking for that help but they also know not to ask for more. This helps you plan and budget your own finances as well. It doesn't matter if it's a lump sum or monthly amounts. Ask your child how they could best use the money and do that."