The true costs of raising a teenager
As much as you prepare for your child’s teen years, will you ever be fully prepared? As a parent, you want to be fully supportive of your child in any way you can. Predicting the ups and downs of this stage is impossible but planning for the expenses of these years is achievable.
In Canada, it is estimated that the costs of raising your child from birth to 18 years old can range anywhere from $160,000.00 to well over $200,000.00 and costs are only going up. Having a plan in place will help you focus on your family as financially stress-free as possible.
To put costs into perspective, we have broken down some of the major expenses you will have to account for during your child’s teen years. Remember these are rough estimates only and do not take into consideration things like part-time jobs, special spending etc. Every family is different, and our outline is here to act as a sample resource only.
It is estimated that a family will spend approximately $2,500.00 a year on groceries alone. These costs may vary as families with boys will likely have higher food costs than those with girls. Buying in bulk can help manage these costs.
One of the highest expenses you will incur during your child’s teen years is the cost of clothing. While boys’ costs for clothes may be lower, girls can be up to 10% more expensive in this area. Encouraging part-time work to pay for this expense is a great way to teach your child the value of money. You may also consider introducing a budget for clothing into your financial plan.
In high school, you can expect to spend upwards of $200.00 on supplies for the year. If your child pursues post-secondary education, costs will drastically increase to include supplies and tuition. Costs are estimated to be around $20,000.00 for a 4-year degree on the low end and can be upwards of $65,000.00 for a 4-year degree depending on the field of study. Having a savings plan in place for education can help manage the rising costs of education.
It is estimated that an average family will spend between $50.00-$80.00+ /month for phone plans. Laptops are an essential part of life and education, and this is a cost you must consider as well. Families can expect to spend $500.00-$2,000.00+ on laptops and software every 3 to 5 years, depending on use. To assist with the costs of technology, try to find family plans that offer cost savings for bundling technology.
Planning for expenses like medical, dental and eye care can assist in upfront costs. Provincial healthcare may cover some services, but not everything. On average, a family should plan for the following:
- $100.00+ per person for basic dental checkups
- $4,000.00+ for orthodontic work
- $300.00+ per person per year for optometry appointments and glasses
- Optional* $400.00+ per year on contact lenses
The costs in this category vary greatly depending on your child’s health history, extracurricular activities, professional services like physiotherapy and more. These are all expenses you may need to account for in your budget as “out of pocket” if you are not covered under a benefits plan.
With a teen in the family, your family car will be put to the test. You can expect extra expenses for things like gas and maintenance as your car puts kilometers on it between appointments, school, sports, family outings, and so much more. If possible, try to manage these expenses by encouraging walking or biking (when possible), carpooling or encouraging part-time work to pay for some of the expenses (or their own vehicle).
You’ve got the savings but they don’t have the interest in post-secondary education
You started your RESP for your child with the hopes that they would pursue post-secondary education, but your child has chosen a career path that doesn’t require a college or university education. What happens to the savings you’ve put aside in the RESP? You have options for keeping your savings as well as your investment growth, even if your child decides to pursue a future that does not include post-secondary school.
If you’re looking to retrieve the savings you’ve put aside in your RESP, consider the following options.
- Your child’s plan may change: Many parents open RESPs for their children in the year they’re born in order to maximize savings for post-secondary education. What many parents don’t realize is that the RESP can stay open until your child turns 35. Don’t rush to close your RESP once your child turns 18 and decides against post-secondary education. For many students, choosing to pursue a college or university degree may happen later in their adult life. Keeping your RESP open allows your child the freedom to change their mind.
- Move your RESP into your RRSP: If your child has no use for the RESP and you want to avoid paying tax on some of your investment, consider moving part of your savings into your RRSP if your contribution limit allows. Keep in mind that you are able to move approximately $50,000.00 into an RRSP for you or your spouse.
- Transfer your RESP: If your child decides to pursue a path that doesn’t include post-secondary education, consider transferring your RESP contributions to another child, if applicable. RESP transfers can be done without tax penalties if the child is under 21.
- Donate your savings to your Alma Mater: Just because your child doesn’t want to attend a post-secondary program doesn’t mean students can’t benefit directly from your RESP savings. Donating your savings to a college or university entitles the institute to the whole amount-without tax penalties-and you may receive a donation receipt for your contribution.
- Consider what funds make up your savings before you close your account: RESP contributions may be made up of personal savings but can also include grants and growth on your investment. Each of these contributions is treated differently and will affect the amount you withdraw should you choose to close your RESP. When you close your account, the following rules may apply:
- You have the legal right to withdraw all your personal saving contributions tax-free.
- You must return or repay all grants issued to the federal government. This includes the Canada Education Savings Grant and Canada Learning Bonds.
- You can withdraw your investment growth on the following conditions:
- Your child is at least 21 years of age and not attending school,
- You are a resident of Canada,
- The RESP is at least 10 years old
Each option will fall into its own set of tax penalties. Speaking with a financial advisor can help you navigate the tax rules for closing your account and maximizing your withdrawal.