By Jasmin Brown - Licensed Insolvency Trustee

BDO First Call Debt Solutions

How to Prepare Your Children for Life After Graduation

Jun 12, 2019 | 10:57 AM

Graduating without debt in Canada is an admirable accomplishment. The question is, should parents shoulder any of the responsibility of repaying loans where post-secondary graduates were unable to avoid using them? Should parents continue to financially support their adult children at the expense of their own financial well-being?

The most recent statistics show that among the graduates who finished school with debt, the average amount owed was almost $28,000. Although measures are being taken by the federal government to reduce the interest rates for federal student loans, owing thousands of dollars when starting a career can seriously hinder a young adult’s goals.

This is where parents often step in to offer financial assistance or a place to stay while adult children establish their independence. It is not uncommon. According to Statistics Canada, one-in-five 25-to-29 year olds lived with their parents in 1995. That number increased dramatically to one-in-three in 2016.

How can you prepare your children for financial independence?

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Whether your son or daughter is just beginning their post-secondary education or they have already graduated, you can help prepare them for life on their own. However, in order for you to protect your own financial future, it may mean limiting monetary contributions and putting your own financial goals ahead of those of your child.

Sharing your knowledge and advice can be just as valuable as offering financial assistance. A few years ago, Money magazine asked parents of recent graduates what advice they would give to their children to “prepare them for life in the real world”. Here is just some of the advice from parents who have been there:

Instead of just giving your children money, teach them how to manage their own money. For parents, this could mean discussing the importance of budgeting, balancing needs and wants and paying bills on time.

Working part-time while attending school will help your child cover some of their expenses. Fewer expenses can mean less reliance on student loans.

“Do not use your retirement money to pay for your kids’ college.” The reality is, your earning and saving years are limited and theirs are just beginning.

Understand that your child may need to live at home after graduation while they look for work. Have this discussion with your daughter or son ahead of time so you can set expectations, along with a few ground rules. Living at home affords your child a terrific opportunity to work at paying down student loan debt.

Help your child choose a degree that that will provide them with job opportunities when they graduate. Yes, there are advantages to education for education’s sake, but parents should talk to their children about the kind of lifestyle they envision for themselves — and how they plan to support themselves.

How to help your child keep debt to a minimum during and after school

For a significant number of university and college students, graduating without debt is just not possible. Nevertheless, it may be possible to decrease your child’s need for credit and loans if you have the right tools. One personal finance blogger advises students to apply for scholarships, take on co-op placements and consider tutoring or becoming a teaching assistant. All are good options to minimize student loans.

Parents can also help their children avoid debt by discussing and modelling healthy financial behaviour. Tracking monthly expenses, using credit wisely, paying bills on time, differentiating between wants and needs and setting financial goals are all important habits to practice and share with your children.