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How I Plan to Save My Child From Crippling Student Loan Debt

Millennial Parents’ Guide to Financial Planning

I never imagined I’d still be paying off my student loans when I had my first baby.

After all, student loans weren’t something my baby boomer parents ever complained about. Even if they graduated with around $10,000 worth of student debt in the late ‘80s (about $40,000 in today’s dollars), their first job out of college brought in a salary of $27,000 (that’s close to $75,000 today – a number that is practically unheard of as a starting wage).

Still, my situation is certainly not rare. We’re living in a time when 51% of Canadian students end up borrowing money to make ends meet for their post-secondary education, and the average debt-ridden student owes $26,819 after graduating.

If I continued making the minimum payments on my student loan, I’d still be paying it off well into my 40s. But by then, I hope to be helping my children cover the costs of their post-secondary education, rather than still paying for my own.

How Financial Stress Is Impacting Early Parenthood

I can’t remember a time in my adult life when I didn’t feel stressed about money. Don’t get me wrong, my husband and I certainly make enough to get by. We now have stable, well-paying jobs, and we’re far from the paycheque-to-paycheque cycle we were accustomed to living in our early years of dating.

But we still have debt.

One student loan, a mortgage, and a car payment. By the time we add in insurance, utilities, groceries, transportation and healthcare costs, we seem to have just enough left over to contribute to our long-term investments.

And now, we also have our baby’s future to think of.

Not to mention any other children we may be so blessed to have joined us in the years ahead.

Being a parent takes patience, lots of coffee, and plenty of deep breathing exercises. But it also takes a lot of money. And as if we aren’t already struggling to get enough sleep, the stress of it all is what keeps us up at night.

Saving the Next Generation From Crippling Student Debt

Two in five young parents rate their financial health as unsatisfactory, according to a survey from the National Endowment for Financial Education and Parents Magazine.

More than half of millennial parents admit they would choose to surrender a year of their life in exchange for more financial security.

I don’t want my own child to feel the financial strain that I have felt as a post-secondary graduate and young parent.

And to think, by the time my daughter turns 18, we’re looking at education costs totaling over $100,000. That number is scary to me.

The good news is: a little goes a long way.

It’s a tried and true financial lesson I learned after graduating and accepting a starting salary that was equivalent to my total student loan debt. It’s what helped my husband and I save up for a down payment on our first home and find money in the budget each month to dedicate to our retirement savings.

And it’s the same approach we’re taking in order to save our children from the crippling student debt we were forced to start our lives with.

Here’s how we’re saving for our child’s future:

Since I will be on maternity leave for the first year of my child’s life, our household income has dropped. Some months, it feels like we’re just getting by.

So we opened an account with Child PlanTM when our daughter was just two weeks old. And we decided to start investing $200 per month. The best part is, it’s not even coming out of our monthly income. This is the total amount the government provides parents through Canada Child Benefit.

If we continue contributing this amount, at age 20 she’ll have $ 66,630 if she needs it for her education, growing to $164,035 when she is 35, to spend on any financial need in life. Her investments will grow completely tax-free, no strings attached. She can use Child PlanTM for her education, set up her own business or even down payment for a home – it’s that flexible.

When you become a parent, you realize you will do absolutely anything for your child. And while there are certainly many life challenges we cannot always protect them from, we can help ensure they don’t feel the same paralyzing financial stress we did.

These numbers may not be the reason my daughter stops waking me up at all hours of the night, but they certainly go a long way in helping me get some sleep again.

Sample illustration of Child Plan™ Cash and Insurance Values

Based on a Monthly Deposit of $225 per month

Age Accumulated Cash Value Life Insurance Value
20 $80,448 (Education) $770,802
35 $184,850 (House) $1,070,880
45 $325,714 (Security) $1,343,568
65 $964,321 (Retirement) $2,082,564

Sample illustration is based on a $225 monthly premium for twenty years, starting when the child is less than 1. Cash and life insurance values are based on the current dividend scale of 6.0% from a Canadian Life Insurance Company. This example is strictly for illustrative purposes only, the annual dividend scale is not guaranteed and values may differ.

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*illustrations are reflective of the annual premium amount

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