It’s September, and some of your clients might be sending the kids away to post-secondary school for the first time. This can be an exciting time. I know that Canadians don’t do this as much as our neighbours to the south, but it still happens. Even if the kids aren’t headed off to school, those who have recently completed school might be getting ready to leave home – maybe even for good in some cases!
In this month’s newsletter article, I want to explore some of the financial planning concerns as the kids head out the door. I am going to stay away from tax topics, such as tuition tax credits. Taxtips.ca, which is one of my favourite websites, has an excellent writeup on the tuition tax credit.
Let’s start with a look at heading to the United States for school – though most American schools would have started their fall semester in mid-August. From a Canadian perspective, this student will not lose their Canadian residency, even though they will likely spend more of the year in the US than in Canada. This means no complicated tax outcomes, and no loss of Canadian health care.
When a Canadian heads to the United States, health care coverage is always a concern. Parents will want to make sure that their child is adequately insured, which likely means an extended stay specialty travel insurance policy. This is not the same as the travel insurance you buy when you’re headed to Hawaii for a couple of weeks – these policies typically have much higher premiums and may even have some underwriting attached. The school that the child is attending will often have specific requirements, including some certification that the student is properly insured. If the child is a student-athlete, there are often coverage minimums that must be met, and many insurance plans may not meet those minimums. In short, it’s necessary to understand what the rules are for the post-secondary institution as well as the coverages that are available.
It’s worth noting that this doesn’t just apply to children – you may very well have a client who is attending school in the US as an adult.
What about out-of-province coverage? Over the last decade or so, provincial health care systems have become a lot tighter with their spending. One result of this is that most provinces will harshly enforce their out-of-province limits. Two areas of concern are hospital stays and air ambulance. These are both items that a non-resident of a province may find are not covered, and these bills often show up unexpectedly. For this reason, when a student is heading out of their home province to go to school, they should make sure there is proper insurance in force. Many of us rely on our group travel plans for out-of-province coverage, but group travel typically doesn’t cover extended stays.
The video that’s linked up in this month’s newsletter deals with changes in household spending as the size of the household changes. While the video goes into more detail, the change is going to be roughly +/- 15% for each person who is added or removed from the household. With a student going to school, however, this may not hold true. If the student is going to school elsewhere, the parents may want to take a couple of trips per year to visit. This can be especially true for student-athletes. It may be that household expenses don’t adjust as quickly as we would like, and the parents also find themselves providing extra financial support to a child who is thousands of kilometers from home.
These are just a few of the financial planning considerations associated with sending a child away for schooling. What challenges have you encountered? Let me know – I would love to hear from you.