Significant involvement in a sport by a client’s child can lead to costs that many clients may not be prepared for. Advisors who provide guidance when it comes to paying for these activities can give families a big boost
Supporting children’s dreams of athletic glory takes more than early morning wakeup calls; there also can be a huge financial commitment. Whether your clients are soccer moms or hockey dads, you can act as the quarterback by helping parents support their children while still paying attention to the (financial) game plan.
The sacrifices required to support children at an elite level of athletic activity is something Terry Willis, vice president at Toronto-based T.E. Wealth, a subsidiary of Industrial Alliance Insurance and Financial Services Inc., understands personally. Willis, who played in the Ontario Hockey League, recalls his parents both having to work to support his hockey dream, his father leaving work early to drive Willis to games and both parents using vacation time to take him to out-of-town tournaments.
“There were a lot of things – sacrifices,” recalls Willis, “that I recognized along the way that Mum and Dad were making.”
The sacrifices that parents make extend beyond the demands on their time. Financial commitments, ranging from registration fees to gas money for ferrying children to practices and games can take a toll on your clients’ finances and retirement plans.
A poll released by Toronto-based Bank of Nova Scotia in March found that, on average, parents with children in minor hockey intend to spend $849 this year. But, as children become more competitive, those costs can escalate. For example, Willis (who is a coach and whose three sons played hockey) lists rep hockey fees at $2,000 for each child.
Although planning for a child’s athletic expenses isn’t so very different from helping your clients reach any other financial goal, there are a number of moving parts that easily can be overlooked. Here are five points to keep in mind for a sports-oriented family:
Start with a goal
Think about what the goal for the child is first. Is this a casual interest in sports or is the dream to go pro? Knowing your clients’ expectations will help you and them to understand the financial commitment.
“Our kids play toward an objective, whether it’s to win a game or to win a tournament or a season,” says Ahmad Dajani, vice president, investments, guaranteed investment certificates and sales tools, with ScotiaMcLeod Inc. in Toronto. “And I think of finances in much the same way.”
Create a (detailed) budget
Get a handle on the expenses related to the sport by asking the right questions. “What’s the sport? What does it entail? Did [your client] speak to the team coach or other parents [to] get an expectation [as to costs]?” suggests Zeljka Turek, investment advisor with TD Wealth Private Investment Advice in Vancouver.
If the budget just doesn’t balance, talk to your client about some possible cost-cutting strategies, such as purchasing second-hand equipment, says Dajani, or carpooling to practices and tournaments.
As well, Turek says, parents could look into possible government grants available or fundraising opportunities, particularly if the child is an Olympic hopeful.
Another option is to budget other family expenses around the child’s commitments. For example, if there is an out-of-town or perhaps out-of-country tournament, says Turek, your clients might consider planning a family vacation around the tournament.
As the expenses pile up, you may need to have a serious conversation with your clients about their priorities. For example, Willis has clients who decided to put their son into private school, despite the $20,000 per year commitment (not including travel expenses for U.S. tournaments), so that he could play lacrosse at a higher level and have access to U.S. colleges because of the competitions.
Such a huge financial commitment could mean that your clients have to decide between their child’s athletic dreams and their retirement plans.
“If you’re going to make that commitment,” says Willis, “then maybe you’re not paying off the mortgage or putting money into an RRSP and you’re working five more years.”
Take a risk
In some cases, your clients may want to consider taking on more risk in their investments as the means to try to make up for any shortfalls between their budgets and their child’s sport expenses.
Generally, the age of clients with children in sports is between 35 and 50, says Turek, and thus these clients are still working and bringing in income. As a result, they might be able to handle more risk, knowing they have more time to recover from potential losses.
Have a plan b
Participating in sports at an elite level can lead to opportunities, from scholarships to multimillion-dollar professional contracts. Even with those lucrative opportunities, Willis says, you should still talk to your clients about contributing to a registered education savings plan (RESP) if they can afford to do so.
“Who’s to say you’re not going to burn your child out by [age] 15?” asks Willis. “Who’s to say they’re not going to blow out a knee at 15? And then they [will] need the RESP.”
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