In 1990, as I was about the graduate from Simon Fraser University, the B.C. government was thinking of raising tuition fees significantly, much like the Qubec government is right now. As you would expect, the students were in an uproar.
During our school's much smaller display of discontent, I sat at lunch with a few student colleagues and watched the parading student protesters chant and yell, trying to solicit our support for a major upheaval later that day.
As one of their ambassadors approached our lunch table, the guys I was sitting with were amused, wondering aloud if the march might be an opportunity for some fun. I was not amused. My face was turning red and I was approaching boiling point. School was not a lark for me. It was nigh unto religious commodity.
Each fall, I typically left my well-paid summer job a couple of weeks late, going back to school days behind the other students. It was agony leaving that easy money for the drudgery of the dank cement library that is SFU.
To comfort myself one September, I ran a capital budgeting analysis to estimate whether or not staying in school made sense financially. I used the same sorts of calculations used by some businesses to determine if the expected future income of a purchased asset would be worth the procurement and installation costs of that asset in today's dollars.
My analysis went something like this: The average university graduate would probably earn X number of dollars more per year, over a 40 year career than the average non-university graduate. I would spend Y number of hours studying per year over four years, and sitting out of the work force for that period. Doing all the math and pulling back future income to present day dollars, then subtracting the costs, (including the cost of quitting my cushy summer job) meant that I was actually earning something in the range of $12 per hour just to study.
Thus, while my non-student roommate was driving a pretty girl (my former girlfriend) around in his shiny sports car, earning $12 per hour as a security guard, I took comfort knowing that I was making about the same amount to study, and could expect a future earning much more.
Back to 1990 and the tuition hikes.
As the student protester approached our table soliciting our support, instead of joining in, I slammed my hand on the table, causing a bit of a stir, and gave him a stern lecture for being selfish, bad at math, and generally prone to whining. Couldn't he see that we were buying an asset that would pay dividends for many years to come?
The area around our table got quiet; my friends squirmed in their seats, and looked away. The guy with the pamphlets looked confused and backed away slowly, turning toward more receptive tables nearby.
Last I checked, my old roommate is still a security guard. It's honest work, and he gets an honest pay cheque from it. I respect that. He married the girl, and they are sending their kids off to university about now.
Other than paying taxes, there are some more direct ways we can encourage the students in our families to carry on with their studies to harvest the expected rewards ahead. These include: Registered Education Savings Plans; Tax-free gifting; and Family Trusts. You may even be able to claim some or all of their student tax credit as a parent or grandparent, softening the cost of your contributions.
Mark Ryan is an advisor with RBC Wealth Management, Dominion Securities (member CIPF) and can be reached at [email protected].
