How young professionals in Ontario can secure their family’s financial future

By avoiding common mistakes, young professionals can establish stable financial foundations while maximizing opportunities to build wealth

FOR YOUNG PROFESSIONALS in Ontario, there is a unique financial situation where their median wages only meet housing expenses and present significant challenges to families working to secure their financial futures. With education costs rising annually, parents are left weighing current cost of living expenses with future tuition payments while trying to build wealth. It’s important to understand local pressures and common mistakes to make informed financial decisions.

Postponing Educational Savings While Pursuing Home Ambitions

The biggest mistake young professionals make is putting off educational savings to pursue aggressive housing strategies, especially considering today’s market trends in the city where houses have significantly appreciated despite some trends towards cooling off recently.

This approach is fiscally catastrophic because education grants from the government are time-sensitive. The Canada Education Savings Grant pays 20% matching on the first $2,500 annually allocated to a child’s RESP, with households earning below $55,867 receiving an extra 20% matching on the first $500. By skipping one year, you lose $500 to $600 that you can never hope to recover later.

The young professionals justify this delay by favoring homeownership and believing that paying mortgages is superior to saving for education. However, it completely disregards the mathematical reality of compound growth and matching by the government. By deferring all plans by five years with a possibility of buying a home, those critical initial years of compound growth are lost irreversibly and significantly reduce the final amount.

The key is to begin now, irrespective of your housing situation. Present-day RESP promoters allow you to start an RESP online in a matter of minutes with minimal initial payments to open up the account and earn government grants. Ontario families are advised to open an RESP account during their child’s first year of life with minimum payments of $100 to $200 per month. This way they can maximize government grants and hold reserve flexibility towards housing goals.

Underestimating the True Cost of Post-Secondary Education

The young professionals in Ontario often underestimate future education expenses, even after their proximity to Western University and the entire Ontario post-secondary environment. The fallacy is brought about by parents’ tendency to make mental math calculations based on today’s tuition fees and not account for inflation and a complete range of education expenses their kids will have to cover 15 to 18 years later.

Western University tuition is now $8,000 to $14,200 for first-year Ontario students whereas professional programs carry higher fees. However, it’s common for Ontario families to only consider tuition while disregarding residence fees, textbooks, technology fees, and living expenses that can double the actual cost of education. Most also underestimate the chances their kids may enter graduate programs or professional programs where fees can triple and quadruple in most cases.

The inflation factor multiplies this mistake by a large factor. The tuition fees in Ontario have always risen by a larger percentage compared to general inflation, so today’s $8,000 cost can realistically become $15,000 to $20,000 by the time today’s toddlers are university age. With residence fees added in, Ontario families must plan for total annual education expenses of $25,000 to $35,000 per child.

This underestimation leads to inadequate savings strategies that leave families scrambling when acceptance letters arrive. Smart Ontario families address this by conducting realistic cost projections using inflation calculators and consulting with post-secondary institutions about total program costs.

Endnote

By avoiding these common mistakes, young professionals can establish stable financial bases shielding their families from financial turbulence while maximizing whatever opportunities they find to build some wealth. However, it’s vital to understand basic principles and local conditions when planning for a secure future for your family, as that’s the only way to succeed.