What If You Need to Put Your Debt First?Jul 31, 2018
We know that young Canadians are feeling the sting of student debt, but what about their parents? This podcast episode is for parents who are financially unable to help their children shoulder the expenses of university. Here’s just some of the advice our Licensed Insolvency Trustees (LITs) have for parents of college and university-bound students.
How to focus on your financial health
Parents obviously want to help their children in any way, including financially. However, this isn’t always possible. And for those who do, stats show that 45 per cent of Canadian parents delay their own retirement in order to help adult children and 42 per cent delay paying off their own debt.
Here are three things parents should think about before they offer their financial help.
- Don’t endanger your retirement plans. You’ve worked a long time for your retirement savings. And, once your children are out of school, they will have quite a few working years to pay back their student debt. (Check out how much you’ll need to retire using this calculator.)
Instead, assist your child by helping them reduce the need for student debt. For example, parents can help kids search for part-time employment opportunities and offer advice and tips for frugal living. If your child will need to borrow to pay for all or part of post-secondary, help them research and apply for government and/or private loans.
- Don’t delay your debt. Whether you’re still paying off a mortgage or paying down consumer debt, those things should be the main focus before you retire and your income drops. In addition, you should ensure your emergency savings are topped up so unexpected expenses won’t throw you off track.
- Find a happy medium. If your retirement plan is progressing nicely and your debt relief goals are on track, you may be able to afford to help your child financially. This might mean reconfiguring parts of your budget or cutting back in some areas to make it work. You could also assist your child by allowing them to live at home while they’re in school or afterward while they work to become financially independent.