If your household is considering private school for one or more of your children, the cost of tuition is likely a factor influencing your decision. Planning for an expense like this can be daunting, so it’s important to consider every option for making things work.
The Globe and Mail spoke with three Canadian financial planners about the best ways to incorporate private-school tuition into your family’s financial plans. Here are their tried-and-true tips for getting started on saving.
‘Avoid making accidental trade-offs'
For Chris Enns, a fee-only financial planner at Toronto’s Rags to Reasonable, the first step in sorting out private-school costs is to look beyond the tuition expense and get a handle on your entire budget.
“It’s very rare that people have money sitting around that they don’t have any plans for,” Enns says. “That means in order to plan for private-school tuition, we have to dig into your complete financial ecosystem to try and find an answer.”
Enns helps clients understand their monthly and yearly cash flow, identifying fixed and variable costs and commitments. This cash-flow analysis helps clients see how much of their yearly income is already “spoken for,” before another commitment is layered onto the family finances, he says.
“Oftentimes, people have an unspoken expectation that they can have it all, but that belief isn’t supported by clear and direct insight into their complete financial situation,” Enns says.
Once clients have that big picture in hand, they can start to make deliberate choices about how to factor the costs of private-school tuition into their budget. This can mean exchanging one or more financial goals – such as early retirement or yearly vacations, for example – to fund the cost of private school.
“With deep insight into your whole cash-flow picture, you’ve now made a very general problem into a very specific problem, finding solutions can be much more manageable,” Enns says. “And any trade-offs you make as a result are deliberate, not accidental.”
‘Look for bursaries and scholarships to help cover the costs’
David Field, certified financial planner at Papyrus Planning in Mississauga, Ont., suggests that families looking for ways to offset the cost of private school by carefully examine any bursaries and scholarships.
As the past editor of Our Kids Go to School, an online directory of private and independent schools, Field catalogued the range of financial-aid programs that private schools offer. While scholarships – awarded to students based on their academic or other prowess – and bursaries – offered to students based on financial need – are relatively rare, they also provide a way to offset the cost of private schools without dipping into the family budget.
Field says both forms of financial assistance are more prevalent at larger, more established schools, which may also be those with higher tuition costs. But what makes a child a good candidate for a scholarship or bursary?
Since bursaries are usually awarded based on financial need, children from lower-income families are the most likely candidates; while scholarships, in contrast, may target prospective students with excellent grades, athletic ability or who meet other specific criteria.
“While a parent thinking about private school shouldn’t assume financial aid will be available, they should also make sure their child has applied for any suitable scholarships or bursaries,” Field says.
‘Start saving early, and put the Canada Child Benefit to work’
Calvin Smeding, certified financial planner with McEdwards and Whitwell Financial Planning in Hamilton, Ont., has focused his financial planning practice on the Christian community, many members of which he says place a high priority on private Christian education for their children. With proactive planning, Smeding says, the costs of private school can be managed on even relatively tight household budgets.
In his work with clients, Smeding encourages families to start saving the Canada Child Benefit (CCB) for a child’s future private-school tuition costs as soon as the benefit starts. He also encourages clients to make RRSP contributions, even if their income is limited. This helps lower the household net income, on which the CCB is calculated; a lower net income leads to higher CCB amounts.
“Every dollar of RRSP contribution can lead to an increase in CCB payments,” Smeding says. “If a family saves those dollars in a TFSA earmarked for a child’s private-school tuition starting from their year of birth, it’s possible the cost of the entire first year’s tuition might be covered by the time the child needs it.”
In order to plan for the costs of private school, Smeding has created a spreadsheet he uses with clients which allows him to model the impact of different levels of RRSP contribution on the CCB.
“While the Canada Child Benefit won’t cover the entire cost of a child’s private-school education, financial planning to help maximize the benefit can help parents get a jump-start on achieving a goal that is highly valued by the clients I work with,” Smeding says.