Prediction: The next text or phone call from your child away at university will be about money.
You've always been a chief financial officer to your kids, but the position becomes more complicated when they head off to college or university. Postsecondary education is a cash-burning furnace that must be fed often.
The next cash call could come at any time. Tuition and residence bills are covered, but students are paying for textbooks and encountering unexpected costs for supplies or activities. Your kid will need money at some point – how will you send it?
Putting a cheque in the mail has to be the worst idea. Cheques are inconvenient in that you have to wait on mail delivery and then go through the hassle of depositing them. Banks are increasingly introducing technology that lets you use a smartphone to photograph a cheque you've received and then use that image to make a deposit electronically. But do you really want to send a cheque to members of a generation that barely even uses e-mail, never mind snail mail?
As much as you can, get out of the habit of writing cheques. The C.D. Howe Institute wrote a report recently that called for them to be phased out because of how much they cost the financial system. The end of cheques is coming, though perhaps not in the near future.
One cheque alternative is the Interac e-transfer, which 200 or so banks and credit unions offer (here's a list: bit.ly/1sUUElh). You may get at least one of these transactions included at no cost in your monthly chequing account package; if not, they'll probably cost you $1.50 a pop. You can notify someone that you've sent them an Interac e-transfer by e-mail, or by a text message sent to a mobile phone. Recipients simply click on a link, choose a bank and log in to their account to deposit their money. I've sent many of these transfers over the years without a single hassle, and one of my sons has used them to pay his monthly rent.
E-transfers are useful to send money quickly and cleanly, but relying on them repeatedly doesn't do much to teach your kids about budgeting and making money last. For that, consider a prepaid reloadable credit card.
These cards carry some annoying fees, so they won't appeal to the frugal-minded. But they do have an advantage that you'll understand if you have to transfer some money to a child at university to buy books and supplies. If you figured $500 was a good amount to budget for that spending, you could load that much on a prepaid card for your child and let her take it from there.
Prepaid cards are different from gift cards, which you typically use and toss in the garbage. In much the same way as you pay bills through online banking, you can reload a prepaid card. Before buying one of these cards, always look at the fees (check under terms and conditions for a full list). Bank of Nova Scotia's prepaid reloadable Visa card has a $10 annual fee that is deducted from the first cash amount you load on the card and then on each anniversary. There's also a $10 fee to close the account and return the remaining cash balance to the cardholder.
Bank of Montreal's BMO Prepaid Travel MasterCard has a $6.95 upfront and annual fee, and it costs $10 to get a cheque for your remaining balance if you close the card ($3 if you get the money deposited electronically to your account). Both it and the Scotia card don't have reloading fees, and both are available through bank branches. Canada Post sells a reloadable Visa card that costs $15 to purchase. There's also a $3 monthly service fee and a $3 reloading fee. If you buy any reloadable card and don't use it for a long period, watch out for inactivity fees. There might also be fees to get a cash advance from the card.
One more way to get cash to your children while away at school is to have a joint savings account with them. If you set up kiddie accounts for your children many years back and still have them, they might be suitable for this. You could put money into the account and your child could transfer it online into his chequing account at the same bank or credit union. I'll look at the best chequing accounts for postsecondary students in a future column.
Rob Carrick