My kids’ post-secondary educations were taken care of well before my wife died. Younger solo parents may be far less prepared.
When Mary passed away in 2020, my kids were 27, 25 and 17. Two were old enough to have finished their educations; our youngest, now 19, lives at home with me while pursuing an undergraduate degree.
I was fortunate (and I do count my blessings despite my loss) that my children’s post-secondary education was planned and financed with Mary’s input and wisdom. But if a partner dies when their children are much younger than ours’ were, that’s not always the case.
When your kids are 8 and 5, their university years seem eons away.
I recently met a young widow who I’ll call Pela – just 42 years old, with two daughters aged 8 and 5. Pela’s husband died of leukemia a year earlier, before they had a chance to cement their financial future as a couple. (Be honest, how many 40-somethings are financially set?)
Pela was left with a mortgage, very little in retirement savings, and nothing set aside for the girls’ post-secondary educations. After all, university was years in the future. One plus was that Pela has a good job in a high demand industry, with a salary that could support her family.
She was set for today, but not tomorrow – and very concerned about ensuring her girls get the education they deserve. So, we talked.
Pela and I sat down and discussed four options.
1. REGISTERED EDUCATION SAVING PLAN (RESP)
An RESP provides tax deferred growth with a partial funding match by the federal government – a smart and solid foundation to build up tuition.
We suggested opening a family RESP. If Pela contributes $2,500 a year for each child, the government matches an additional 20% — that’s $500 per daughter, for a total of $3,000 each.
Here’s the math if Pela starts today and until the girls turn 18.
| RESP CONTRIBUTION | GRANT | TOTAL AT AGE 18 | |
| DAUGHTER ‘A’ (currently 8 years old) |
$2,500/annum x 10 $25,000 |
$500/annum x 10 $5,000* |
$30,000 + tax-deferred growth on money saved |
| DAUGHTER ‘B’ (currently 5 years old) |
$2,500/annum x 13 $27,500 |
$500/annum x 13 $6,500* |
$34,000 + tax-deferred growth on money saved |
Once their post-secondary education begins, the girls can withdraw against these amounts for tuition, books and accommodations like dorms. Withdrawals against RESP contributions are non-taxable while any money withdrawn against the grant or investment earnings is taxable. But since most students are in a low tax bracket, the girls likely won’t pay any taxes.
With $11,500 in total grants and the possibility of withdrawing funds tax-free, an RESP is solid option for Pela.
2. LIFE INSURANCE
Nobody likes to think about life insurance (I know I didn’t), but with one parent gone, Pela absolutely needs it. Suppose she passed away as well – contributions to the girls’ RESPs would end. Who’d pay for tuition?
We advised Pela to apply for term life insurance equal to the girls’ total tuition costs. If Pela died before they turned 18, the death benefit would be held in trust. The trustee would ultimately use those funds to pay educations costs.
(There are other considerations with insurance, but that’ll be a different conversation.)
3. CPP SURVIVOR CHILD BENEFIT
Children under 18 (or 24 if full-time students) are eligible for a monthly Canada Child Benefit of $264.53 (in 2022). This is money Pela can add to her $2,500/year RESP contribution for each daughter. $264.53 times 12 is over $3,000 a year, so this almost doubles her contribution.
While any contributions above $2,500 aren’t eligible for the 20% grant, all funds in the RESP grow on a tax deferred basis. Again, withdrawing funds will probably be tax-free.
4. ONTARIO STUDENT ASSISTANCE PROGRAM (OSAP)
If necessary, government assistance is available for residents of Ontario. There’s two types:
- Grants. Money they don’t have to pay back.
- Student loans. Money that’s paid back once school is finished.
An application needs to be filled out with the Ontario government before starting university or college. The girls will automatically be considered for grants and loans; how much they’ll qualify for depends things like education expenses, course load, and the family’s personal financial situation. In Pela’s case, her higher-than-average income and relatively strong financial state may mean the applications are rejected. Still, it’s an option Pela can turn to as a “last resort”.
You don’t have to be alone in your decision making.
In chatting with Pela in my role as a “professional financial advisor” I realized, as a widower, how much I would have struggled if I hadn’t been able to discuss my own kids’ education with my partner.
Which university should they go to? Should they live on campus or at home? Should we pay our kids’ entire tuition, or should they chip in? These were conversations I was fortunate to have.
But for young widows and widowers like Pela the only real advice I can offer, beyond my financial expertise, is to turn to family and friends who can empathize with your situation. Do you know other widows or widowers, or solo parents? Have you encountered professionals who’ve walked in your shoes? Who’ve been there?
Remember, it’s okay to ask for help. Seek the advice of these “voices of experience” so you can make truly informed decisions about your children’s futures.
Believe me, you’re not alone.
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