Rising costs hinder education savings, with many families unable to contribute to their children's future
Canadian parents are finding it increasingly challenging to save for their children's education due to rising inflation and high living costs, as highlighted in a survey reported by BNN Bloomberg.
Conducted by Embark, an education savings company, the survey found that over 76 percent of parents report difficulties in setting aside money for education, with nearly half ceasing contributions to their children's education savings accounts.
Andrew Lo, president and CEO of Embark, commented on the challenges faced by parents. “Today’s parents are watching their children grow up during a difficult job market and volatile economic conditions, and they see how higher education can provide security for young adults,” he stated.
Lo emphasized that parents should not feel guilty if they are unable to save for education or if extreme measures are needed to equip their children for success.
The survey also indicated that education savings are a crucial part of financial planning for many Canadians. About 66 percent of respondents would delay retirement to finance their child's post-secondary education, and 43 percent would consider going into debt for this purpose.
Furthermore, the emotional impact of education savings is significant, with 69 percent of parents concerned about their child's potential education debt and 64 percent feeling they would fail if their child incurred substantial debt while pursuing education.
According to Robertson College, the average student loan debt faced by Canadian graduates is $28,000, contributing to a national total of over $23.5bn.
Embark advises parents to start saving early and maintain consistent contributions to manage education savings more effectively.
“If you and your partner both save $50 every month, you’ll have enough to cover this cost by the time your child turns 18, assuming a four per cent rate of return and all the government grants you’d get from saving in a registered education savings plan (RESP),” Lo explained.
He highlighted the benefits of even modest savings, which can accumulate significantly over time.
The RESP allows caregivers to save up to $50,000 for a child's education, with the government matching 20 percent of contributions annually up to $500, with a maximum of $7,200 per child over the lifetime of the account.
