Talking to Kids about Heading Off to University/College Part 4 (of 4)
Posted by Gail | Filed under Kids & Money
8. Does your child know how to keep his or her stuff safe? Having lived a pretty sheltered life, your child may not be able to imagine that someone would go into his wallet or her purse and steal. But campus life can be like the real world and kids have to lock up their stuff and keep their wallets close at hand if they don’t want to find that light fingers have been at work. Time to implement passwords on computers (if they haven’t already done so to keep your prying eyes away). And it’s time to talk about not giving your PIN on your bank card to anyone, not even your great love or your BFF. Ditto letting anyone else use your credit card, lending out money, and offering to cover the bill because someone else “forgot his wallet.” Most kids are pretty savvy. Some kids are not. If you don’t at least talk to them about what could happen, you’re not doing your job.
9. Does your kid know how important it is to be on time with bill payments? Procrastination may have been the name of the game in high school but your child may be about to learn that it doesn’t work at college or university. Neither does being late with bill payments. Even a few days late will mean fees, service charges and/or interest costs. This may not be as big a deal if kids are living in residence where everything has already been covered. However, there may still be bills for which they are responsible, like cell phone bills. Talk about how dumb it would be to ruin a brand new credit rating because a body was too disorganized to get a cell phone bill paid on time. If your kid is sharing space with others, there will be more bills and if they aren’t paid on time, there will be more costs.
10. Does your kid know to file a tax return every year? Your child should file a tax return every year even if she doesn’t have to pay tax. Once she’s 19, she’s eligible for the annual GST/HST credit, but you can only get it if you’ve filed a return.
Some provinces provide tax credits for low-income taxpayers, which many students qualify for, so check out what’s offered in your province. Your child may be able to get a tax refund even if he never paid a penny in tax.
If a kid works in the summer and has tax withheld, he may be able to recover all or most of it by filing a return and claiming tuition fees, the education amount and the textbook tax credit. If they aren’t needed in one year, they can be carried forward or transferred to a parent or grandparent
Tell Junior to keep all his receipts for travelling to and from university. Moving expenses are deductible if your residence is at least 40 km closer to your new workplace or school than your old residence was. But they can only be deducted against a) employment income at your new location or, b) award income such as fellowships, bursaries, scholarships and research grants when you’re moving to school. Moving expenses include transportation costs, the cost of any meals and lodging en route and up to 15 days of temporary accommodation near your new or old residence. Receipts don’t have to be filed with the return, but keep ‘em in case the tax man asks to see ‘em.
This is an exciting time for kids headed off to university. At least as much consideration needs to be given to the money stuff as to what they’re taking to make life at university comfortable. Budgets, student loans and taxes may seem trivial in light of the big changes ahead, particularly to kids, but they aren’t. This summer, spend some time talking about the unique challenges and opportunities ahead and at least plant some seeds. As your kids come face to face with the issues you talked about, they’ll have some sense of what to do next because they won’t be working from a blank slate.
Part 2: contracts, impulse control and credit cards
Part 3: the cost of student loans
June 4, 2010 at 6:54 am
Very timely post Gail. My youngest is off to university this fall. There is one other area to mention to students about to head off to university – bank fees. Our son used his debit card thinking he had enough to cover the coffee/snack. He went under his account by about .25 cents & at the start of the next month he got hit with almost $5.00 insufficient funds/overdraft fees.
June 4, 2010 at 9:28 am
It is so important for young people to keep their info confidential.
I have a story… young ‘Joe’ heads off to school. Life is good, Joe & friends go out to eat and everyone stands around to see your PIN getting punched in as he pays for his lunch. Well Joe’s roomie is running a little short on cash one month – so he knows Joe’s PIN # from the many times they have been together.. and just ‘borrows’ the card to get some cash out of the ATM! Poor Joe goes to pay his rent and there is NO money. ‘Friend’ has taken more then $3000 out of his account in a month time!
So beware.. even if they are your friend – friends get desparate, so never share your PIN.
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June 4, 2010 at 2:48 pm
To get credit for your tuition and education amounts, the student must report the amount on their return. Some parents are of the impression that if they pay, they can claim the tuition and education. No, you can claim an amount transferred to you from the student, and only if they sign off on the document allowing this. Any unused tuition and education amounts will be carried forward for future years.
Students should also be aware that an income from RESP must be reported on their tax return.
Properly filing their return could save the student and possibly their parents from a headache down the road.
June 4, 2010 at 5:43 pm
You should mention the cost of roommates too, such as whose name goes on the power bill and how that person is liable for the entire bill when roomie defaults or skips town.
June 5, 2010 at 7:01 pm
Cynthia: I admit that it has been a few years, but I don’t recall having to claim my RESP income on my taxes. In fact, that would be double-taxation on that money since you pay taxes on the income before it goes into the RESP (unlike an RRSP). I’m fairly certain that you are incorrect that it needs to be claimed at tax time.
June 6, 2010 at 12:16 pm
I think it should be mentioned that parents need to start letting go as kids move off to university. TEACH them about paying bills, filing taxes and all the other great stuff Gail has mentioned, but don’t do it for them. I work at a university and the number of calls I get from parents is ridiculous (especially at tax time.) Not to mention, FIPPA laws prevent me from discussing the student’s record or account with a parent. Students always need to be taught to seek out info on rules, regulations, important dates, etc. and take advantage of the amazing accessibility of it on uni websites. Foreinformed is forearmed.
June 6, 2010 at 7:05 pm
Tim. You do. If you are issued a T4A for that amount. The idea of a RESP is the same as a RRSP pre-tax saving where you are taxed later on when you take money out.
Payments from a registered education savings plan (RESP) shown in box 40 (also see line 418) or box 42 of your T4A slips;
Source: http://www.cra-arc.gc.ca/tx/ndvdls/tpcs/ncm-tx/rtrn/cmpltng/rprtng-ncm/lns101-170/130/s-thr-eng.html
June 6, 2010 at 7:27 pm
Tim/Cynthia, the T4A is only issued for the income earned in the RESP. Tim is right that the return of the principle is not taxed. And Cynthia is right that the income is. Since the payouts from the RESP are a combination of principle and income earned, the full amount taken from the RESP is not taxed.