Alean summer job mar-ket has left many post-secondary students turning to their parents for financial aid. In turn, those parents may find themselves forking out more cash than anticipated for their children’s education, and as a result, may need advice on how to best help their children financially.

Indeed, many young people are in a bind. Employment among those aged 15 to 24 fell by 10%, or 152,000 jobs, this past July, according to Statistics Canada’s July 2009 labour survey. At the same time, students are facing hefty costs related to their post-secondary education. Total fees, excluding residency, averaged $5,348 for undergraduates and $6,957 for graduates for the 2008-09 academic year, according to StatsCan.

Furthermore, 43% of new college and university students and 35% of the returning students felt their spending money would take them only as far as winter break; half said it would run out before the school year ends, according to a survey of 1,200 Canadian university and college students by Toronto-based Royal Bank of Canada and the Toronto branch of Paris-based Ipsos-Reid Corp.

For clients who have already depleted the registered education saving plans set up for their children, there’s little they can do except borrow money to make up for the shortfall, says Emmanuel Hergott, divisional sales leader of Toronto-based Bank of Montreal’s retail investments division.

One option for middle-income client families is a student line of credit. (Government student loans are geared toward students with parents in lower-income brackets and are not available to most children of middle-income parents.)

“Given the lower borrowing rates today, parents can co-sign a student line of credit for their child,” Hergott says. “While the child is at school, the only monthly payment is the interest. There’s a grace period of about a year after leaving school before the child needs to start paying back the principal.”

Clients can also borrow against the equity built up in their homes, Hergott adds: “Property values, for the most part, have maintained their value. Individuals who have paid down their mortgages aggressively can borrow against the [home] equity at a low interest rate.”

Clients can then invest those funds in an investment instrument, such as an income fund or bonds, that pays a monthly income that can be used by the child throughout the school year.

Clients with younger children who may be five to 10 years away from graduating high school can avert a student cash crunch by setting up RESPs now.

“If the client has an RESP, make sure they are funding it as much as they can while staying within their personal household budget,” says Andrew Pyle, a wealth advisor in Peterborough, Ont., with Toronto-based ScotiaMcLeod Inc.

The Canada Education Savings Grant program offers incentives to encourage contributions to RESP accounts. The federal government matches annual contributions, up to $7,200 per child to the age of 17.

“In good economic times, when student employment is very robust, student expectations for income and quality jobs are probably very high,” says Wade Hamilton, a senior financial consultant in Moncton, N.B., with Winnipeg-based Investors Group Inc. “We are in an environment now in which student expectations or willingness to work lower-end jobs hasn’t come down in line with the job openings.”

This is the point at which, he adds, parents need to step in and tell kids that working at any job is better than no job.

In the meantime, some grandparents are picking up the tab for their grandchildren’s education costs. They don’t want to see their grandchildren finish school in debt, Pyle says, which is why some grandparents are using the money they have in non-registered savings accounts to help out.

Some grandparents have also started contributing to their grandchildren’s RESPs as soon as the children are born; the idea is that the grandparents can maximize contributions in the earlier part of the children’s lives until parents can afford to do so themselves.

Pyle has also noticed a similar trend with tax-free savings accounts: “We also see a lot more seniors opening TFSAs as a funding tool for their grandkids by naming the grandkids as the beneficiaries. [Grandparents] are building this nest egg that gets passed along tax-free. If a child is two years old today and, 16 years later, Grandpa passes away, there could be a significant amount of money to defray the cost of that child’s education.” IE