Managing the costs of sports

> How much it will cost, not just initially but over the years during which the child is training.

> What things may or will have to be given up, such as family vacations, time spent with the other children and career advancement for the parents.

> How to make sure the other children don’t suffer emotionally from all this.

The financial costs can be significant. Daniel Carlson, regional director in Toronto with Winnipeg-based Investors Group Inc., says playing on a AA hockey team can easily cost $7,000-$8,000 a year — and you’d need to add $3,000-$4,000 more if the child goes on to AAA. The costs usually include extra lessons and hockey camps in the summer and over the Christmas and spring breaks. There also can be physiotherapy or chiropractor bills for injuries.

Then, there’s the time commitment. Carlson’s younger son plays AAA hockey. There are two practices and two games a week, each of which involves a three-hour round trip. There also are weekend tournaments that run Friday through Sunday, which may be out of town. Parents often have to take vacation days from work to accommodate these activities.

On top of that, fundraising is usually required by parents with children on such teams. This involves selling tickets to friends and acquaintances for dinner dances and going door-to-door selling raffle tickets, for example.

Another result is that the family might have to move. Myron Knoedel, director of tax and estate planning with Investors Group, notes that in Winnipeg, local minor-league hockey teams own the rights to any child living in their area. He knows of one couple that had to move to a different part of the city so that their daughter, who was very talented, could be involved in a good hockey training program. The mother ran a successful daycare centre out of her house, which she had to sell and then try to establish another business in the new neighbourhood; her husband had a longer commute to work.

These are some of the negatives. But if your clients are willing to make those sacrifices, there also are positives, says Carlson, including the development of character and leadership skills.

There also is the possibility of a university scholarship. Carlson has a colleague whose two daughters are volleyball players. The eldest has a “great” scholarship at a U.S. university, providing tens of thousands of dollars; still, there are many other significant costs, such as her flights home and the cost of the parents going to tournaments. Volleyball also is a sport with lots of injuries, so there are physiotherapy and chiropractor bills.

The younger daughter also has a volleyball scholarship, but at a Canadian university. It is less generous, as Canadian scholarships usually cover only tuition.

Cathie Hurlburt, senior financial planning advisor with Toronto-based Assante Financial Management Ltd. in Vancouver, has a daughter who swims competitively, a much cheaper sport than hockey or skiing, and the daughter’s coach says she could be a contender for a scholarship.

“You can justify spending a lot of money if there’s going to be a scholarship at the end,” says Hurlburt. She also notes that there is a rule pertaining to U.S. scholarships that holds that an equal amount of scholarship money has to go to girls as goes to boys at the institution, which means that there are lots of scholarships for which Hurlburt’s daughter could apply.

This assumes your client’s child is able to pursue the sport while keeping his or her grades up. Tutoring, which could be expensive, is a cost that neither you nor your client might think of initially.

Here’s a look at the issues that need to be covered when planning for the serious pursuit of sports by your client’s child:

> Direct costs. The costs of equipment, clothing and fees to play the sport are obvious, but it’s important to find out how much those costs rise as the child progresses in the sport and what other lessons and camps would be needed for the child to excel.

When a child starts in hockey, the cost is about $1,000 a year. But, as noted above, if the child is talented and wants to pursue the sport seriously, it rises quickly.

There is very little government help for this. The children’s fitness tax credit is non-refundable and covers only $500 of the costs of enrolling a child under age 16 in an eligible program of physical activity. In the 2011 federal election campaign, Prime Minister Stephen Harper talked about the possibility of doubling this tax credit, but that won’t happen until the deficit is eliminated, which Finance Minister Jim Flaherty thinks won’t be until the 2016-17 fiscal year.

> Indirect costs. These include the financial costs and time commitments mentioned above, but also include the impact on your client’s or his or her spouse’s work and prospects for promotion. Moving ahead in a career often involves long hours, which would not be feasible, given the time commitment required for a child’s serious pursuit of athletics.

Then, there’s the impact on the other children in the family, as there will probably be less money to spend on them and, even more important, less time to spend with them. Family vacations, for example, may have to be curtailed or eliminated.

The parents have to figure out how to be fair and available to all their children. The other children need to understand why more time and attention seems to go to a certain brother or sister. The athlete’s siblings need to know they are equally loved and be reassured that their parents will be there for them when they need them. This means explaining the situation when the siblings are old enough; discussing how their needs will be met; and making sure that time is spent with each of them, regardless of how little time there appears to be.

The athlete also has to understand that his or her needs are not paramount. If the sports activities are negatively affecting the other children or the parents, the athlete may not be able to continue with the activities.

> Location and communication. A seriously talented child may have an opportunity in another city that could allow him or her to become the athlete he or she wishes to be. There are a slew of questions regarding this:

1. Is your client prepared to move to that location or have the child go on his or her own? What would be the cost, financially and psychologically, of moving the family? What would be the direct financial costs of sending the child elsewhere for training? This includes: room and board; travel for the child, the parents and sometimes the other children; and, if the location is outside Canada, medical insurance.

2. If the child does go away, how will the parents communicate with the child? Via telephone, cellphone, email and/or Internet? Also, how often should the parents visit the child, and how much would this cost?

3. How will the parents cope with homesickness? The loss of intimate contact with family and of frequent contact with friends can be devastating for adolescents, says Carlson. The parents need to be prepared to deal with this immediately by visiting the child and deciding whether the child should return home or get help from professionals, such as psychologists or other therapists and church ministers.

4. How will the parents monitor the child’s life in the new location to make sure the child is being treated well? “The physical, mental and psychological safety of a child billeted away from home is a huge issue,” says Carlson. Again, the parents need to be prepared to deal immediately with any sign of unhappiness — let alone abuse, which does happen.

5. Will the child’s education suffer in the new location? The odds of a child, however talented, becoming a professional athlete are never high; even if the child makes it, he or she still will need to earn a living when that career is over. Your client needs to evaluate the quality of education in the new location. Tutoring or, perhaps, private school may be needed, so your client needs to know the potential costs and decide if they are affordable.

> Scholarships. When a scholarship is for attendance at an educational institution that grants degrees, including many outside Canada, it generally qualifies for the scholarship tax exemption. However, because scholarships are a taxable benefit, the child must file a tax return, including the scholarship money received, as well as other income, tuition, books and other expenses. There are various Canada Revenue Agency (CRA) forms that the institution in question may have to fill out. Otherwise, says Carlson, there will be penalties and interest due.

If the possibility of a scholarship outside Canada arises, Carlson advises making a list of the institutions that offer a scholarship in that particular sport and find out if the CRA will accept those institutions for the scholarship exemption.

You also want to make sure that the schools offer credible courses. If the child transfers to another school, you want to be sure his or her credits will be accepted. IE