Tag Archives: CBC

Financing Post-Secondary Education: It’s a family affair

By Sheryl Smolkin

21Aug-packingforcollege

Before your child heads off to university or college this year, you need to have a frank discussion about how much it will cost and how much you can afford to contribute to his or her tuition and living costs.

If you opened a registered educational savings plan (RESP) when Janice or Jasper was much younger, that nest egg will be a big help. Some young people have also had summer or part-time jobs for many years and have a healthy balance in their savings account.

But with the escalating costs of post-secondary education, chances are that most students will be looking to “the Bank of Mom and Dad” for some assistance, even if that only means living rent free while going to school in their home city.

According to the D+H Student Index survey of 752 Canadian high-school and post-secondary students, when talking to their parents about the cost of school, one in three students say the conversation revealed a gap between the cost of post-secondary education and the financial support their parents could offer. Students only realized the need to line up other sources of financing after having these family conversations.

Fortunately, it’s not taboo for Canadian families to talk about money. Four in five students (80%) say they don’t have any difficulty talking to their parents about money. For the majority of students (55%), the family discussion on how to finance post-secondary education happens in grade 11 or 12.

Reflecting on these conversations, Canadian students say if they could do it again, they would go in with a more realistic idea of the cost of post-secondary education (36%) and have the conversation earlier (26%).

According to Statistics Canada, on average, undergraduate students paid $5,772 in tuition fees in 2013-2014. Over four years, that is more than $20,000 for tuition, before considering other expenses such as books and additional academic fees or any living expenses.

Canadian students usually line up a variety of sources to cover the cost. The top five sources of funding are:

  • 43%: Parents are paying
  • 43%: Student savings
  • 41%: Government federal and/or provincial loans
  • 41%: Summer jobs
  • 39%: Scholarship money or grants

When parents offered financial support over 1/3 of students said the support was unconditional. However in some cases students were required to get good grades (41%); work in the summer (39%); and/or work part-time during the school year (19%)

Three-quarters of students who took out student loans say they could not afford post-secondary education without one. Nine in ten (89%) say the loans helped them pursue their education and career goals.

A recent CBC article reports that Canadians graduate with an average student debt load of $25,000. But for many others the amount is much higher, particularly if they study for professions like law, medicine or engineering.

High debt loads are not only a financial stress but can delay the time it takes individuals or couples to reach certain milestones, such as having children, getting married or owning property.

Therefore, the sooner parents and children talk about and begin saving for post-secondary education, the better. To the extent possible, students should also be encouraged to select a field of study leading to jobs where there is a healthy demand for new graduates.

 

Book Review: FAMILY, KIDS, MONEY

By Sheryl Smolkin

15May-Olearybookcover

Kevin O’Leary is one of North America’s most successful entrepreneurs, as well as a star of CBC’s Dragon’s Den and ABC’s Shark Tank (where he will appear exclusively next season). He has co-founded, funded and sold numerous companies in a wide range of industries. Kevin is currently the Chairman of O’Leary Funds, a billion dollar mutual fund and O’Leary Mortgages. He also co-hosts CBC’s The Lang and O’Leary exchange.

In his most recent book “Cold Hard Truth on Family, Kids and Money,” O’Leary takes a life cycle approach to decisions creating a financial family dynasty. Unlike most of the books we have reviewed in this space, the focus is less on the precise details of budgeting or saving money and more how to choose a mate, build a long-lasting marriage and pass on good financial skills to your children.

He starts by describing his mother’s second marriage which lasted 46 years because it was based not just on love, but on shared personal and financial values. He says, “Marriage is like a pizza pie, where love is only one slice.” Therefore, he firmly believes couples should date for at least three years to really get to know each other before marriage.

He also recommends that couples complete individual “financial due diligence” work sheets before sealing the deal. This comprehensive questionnaire covers educational background, employment history, personal debt and any criminal history.

O’Leary acknowledges that this may not seem very romantic. However he says there is nothing that will kill the romance faster than finding out after the wedding when you apply for a mortgage that your partner is deeply in debt and has a terrible credit history.

Not surprisingly, he also believes the reason many arranged marriages work out is because before setting up a first date a good matchmaker will consider the couple’s temperament, education, personal values and attitudes towards money.

When it comes to the kids, O’Leary says the most important thing you can give them is your time. But an early MBA (money and banking awareness) comes a close second. Every financial interaction with your child is an opportunity to teach by example whether you are buying groceries or visiting your investment advisor.

Because financially illiterate children turn into financially illiterate adults, he encourages parents to teach them the basics at home from a very early age. “There’s no need to make lessons too complex for kids. Don’t spend too much. Mostly save. Always invest. These are the building blocks,” he says.

Always an entrepreneur, O’Leary is a big fan of the wealth that family businesses can create. But he uses anecdotal examples to illustrate the money mistakes you can make in a family business and the fixes. For example, he says don’t be in a rush. It’s better to do your research first and produce a quality product. And if the business doesn’t make money in three years, he advises you to cut your losses and move on. It’s a hobby not a business.

Finally, he confronts head on some tough issues like the financial implications of a divorce and the high cost of retirement homes and long-term care. He is an unabashed advocate for the purchase of long-term care insurance.

The book covers a lot of territory and in some sections it feels like a series of individual essays rather than a cohesive whole. Even if you do not fully agree with every aspect of O’Leary’s business-like approach to love and money, you are bound to find some good ideas to apply to your own family and finances in this 262-page book.

You can buy Cold Hard Truth on Family, Kids and Money online from Indigo. The paperback costs $11.47 and the Kobo version sells for $12.99.

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Raising funds goes global

By Sheryl Smolkin

SHUTTERSTOCK
SHUTTERSTOCK

Whether you are starting a business, writing a book or spearheading a charitable cause, you may need to raise money. Crowdsourcing or crowdfunding web sites allow you to globally market your campaign well beyond the boundaries of your own community or province.

For example, you can raise money on Indiegogo for just about anything including community, health-related and environmental projects. In fact, in June 2012 Max Sidorov, a Toronto college graduate used Indiegogo to raise over $700,000 to send tormented school bus monitor Karen Klein on a vacation, with lots to spare.

In another recent project, Courtney B.C. resident Shawn Wood almost tripled his initial goal of $5,000 to finance a dream wedding for his fiancé Emily Niinmets who has terminal lymphoma.

And even celebrities are getting in on the act. In a six week campaign, author Margaret Atwood raised U.S. $94,995 (original target $85,000) to develop an online event space where artists and performers can connect with fans and aficionados called Fanado.

You can opt for one of two funding models.

  • With flexible funding, you pay 4% to Indiegogo if you reach your target amount, or 9% if you do not. This encourages people to set reasonable goals and promote their campaigns through other forms of social media.
  • A fixed funding option also costs 4% if you reach your objective, but if you do not, you receive nothing and your contributors are refunded.

Currency exchange fees may also apply and there is a 3% fee for credit card processing plus a $25 wire fee for non-U.S. campaigns.

Your campaign is built online using the Indiegogo platform and will typically include one or more videos and text. One-click social media integration, direct email and announcement features are designed to help spread the word, raise awareness and increase funding. Indiegogo also uses an algorithm they call the “gogofactor” to select the most active campaigns featured on its homepage.

Kickstarters is another popular crowdfunding site limited to raising money for creative projects. The catch is that unless you raise all the money you need, you don’t get any of it. If the project is successfully funded, the credit cards of all contributors are charged on the same day and Kickstarters deducts a 5% fee.

Until recently it has been largely inaccessible to many Canadians as participants had to satisfy the requirements of Amazon Payments including having a U.S. bank account and a major U.S. credit or debit card.

However, with the recent launch of Kidstarters Canada, this popular platform is more accessible to creative Canadians. For example, The Aesthetic Studio of Toronto has raised $96,708 (original goal $55,000) to develop little customizable robots and entrepreneur Y.Z. (full name not provided) has raised 147% of the money he needs to develop a token card  designed to hold 8 Toronto Transit Commission tokens and fit into your wallet’s credit card slots.

A research report released last year by industry publication The Daily Crowdsource says crowdfunding has gone from a $32 million market to a $123 million market in the past two years.

Ninety-three per cent of successful campaigns offer donors incentives for contributing. For example, Toronto-based Matthew Ogelsby’s drive to raise $10,000 to expand his comic book series, “Romantically Apocalyptic Books of Captein” generated $51,873. For a $10 donation, contributors got pdfs of two previous books. CDs, greeting cards and an autographed print were added to the package for larger donations.

Kickstarters reports that the average crowdfunding campaign tries to raise $5,000 and 56% of all campaigns fail. With an average campaign target of $3,700, 80% of Indiegogo projects fail.

“The most successful campaigns are proactive, have a good pitch and find an audience that cares,” says Indiegogo spokesperson Rose Levy.  “The campaigns with the greatest challenges are those where participants think all they have to do is post their story and the money will pour in.”

The U.S. Securities Exchange Commission has recently passed equity crowdfunding rulings that allow backers to reap eventual financial returns on investments. The investment scale for businesses and start-ups is much larger than for typical donation-based crowdfunding campaigns.

The Ontario Securities Commission issued a progress report stating their interest in moving forward with the development of a regulatory framework for equity crowdfunding. However, the report highlights the difficult balance that must be attained to provide investors with adequate protection against the risks of investing through this new marketplace without imposing excessive regulatory burdens on issuers and funding portals that would unduly impede the effectiveness of this means of raising capital.

For the pros and cons of crowdfunding, see this CBC article. Filmaker Ian MacKenzie has compiled a list of crowdfunding sites with links for various purposes.

Have you had a personal experience with crowdfunding as a donor or a fundraiser? Share your tips with us at http://wp.me/P1YR2T-JR and your name will be entered in a quarterly draw for a gift card. And remember to put a dollar in the retirement savings jar every time you use one of our money-saving ideas.

If you would like to send us other money saving ideas, here are the themes for the next three weeks:

31-Oct Winter travel Planning your winter getaway
07-Nov Augmenting your income Seasonal jobs
14-Nov Work expenses Why you should pack a lunch