Parents come up short on education savings

Almost half of Canadian parents with children heading off to college or university this fall have not saved any money to help fund the educational journey, according to a recent survey.

The TD Canada Trust 2011 Education and Finances Survey found 45% had nothing set aside, and one third expect they will only be able to chip in less than 10% of the cost. Just 12% of parents with children under the age of 18 said they plan to shoulder 100% of the cost.

“Next to saving for retirement, one of the biggest financial challenges the majority of Canadians will face is saving for their children’s education,” says Shahz Beig, associate vice-president, personal lending, TD Canada Trust. “For university and college students living away from home, the cost of pursuing an undergraduate degree is approximately $80,000, so it’s no surprise parents are struggling to make ends meet.”

Half of the survey field said they expected to pay most of the expenses, with the student supplementing with earnings from summer jobs.

The survey found 31% of parents expected their children to work to pay for their post-secondary schooling, while 26% expected their offspring would land a scholarship. One quarter expect their child will require a student loan.

There is some hope for the future generation of post-secondary students, however. The TD survey found that new parents were the most likely to have started saving for their baby’s future education.

Seventy-one percent of parents with children more than 16 years away from post-secondary school have started saving, compared to just 55% of parents whose kids are enrolling this fall.

Among those whose children will be heading to college or university in one to five years, only 57% have started saving, while 60% of those whose progeny are six to ten years away from school have started saving.

Younger parents, under the age of 35, were the most likely to have started a savings plan (89%), while only 60% of those between 45 and 54 had started saving.

“It’s great to see new parents starting to save earlier for their children’s education. Even if you don’t have a lot of money to save, be diligent about putting away a little bit with each pay cheque into a Registered Education Savings Plan (RESP) and take advantage of tax-deferred growth,” says Beig.

Among the survey sample, awareness of the Registered Education Savings Plan (RESP) has improved, with 62% of parents planning to use one—compared to just 53% in TD’s 2010 survey.

The TD Canada Trust 2011 Education and Finances Survey polled a representative sample of 640 Canadian parents of children aged less than 18 years through a custom, online survey. The survey was conducted by Environics Research between June 10-20, 2011.

Staff

The staff of Advisor.ca have been covering news for financial advisors since 1998.