TORONTO – Canadian parents are increasingly worried about the cost of their kids’ higher education. A new survey showed that while nearly half of Canadians say it’s important to begin saving early, less than a fifth (17 per cent) believe they are saving enough money for their children’s post-secondary education.
According to the Scotiabank survey, four in ten parents surveyed said they believe the cost of a college or university education is putting it out of reach for their children. And the majority (68 per cent) said rising tuition fees and housing expenses is a concern to them.
How much do you need to save? And when to start? Global News asked experts for their advice.
READ MORE: How parents can help save for their child’s post-secondary education
When do I start?
You hear it all the time, but experts say the sooner you save, the better.
Starting an RESP account is ideal and contributing about $2,500 per year per child—or $208.33 per month—would be optimal said financial advisor Derek Moran.
“The sooner they start, the easier it is to accumulate a reasonable amount,” he said. “With accumulation of wealth, time is always a significant factor.”
READ MORE: Parents to cover children’s education despite lack of savings, says poll
How much do I need to save?
“Many parents are in a very tight cash flow situation in the first few years of a child’s life, as they are often going from two incomes to one income,” said financial planner Julia Chung. “The savings need to be reasonable given the individual situation.”
The Scotiabank survey found that parents and guardians in Atlantic Canada estimated the average total cost of a post-secondary education for their child, including tuition fees, housing, and other expenses, will be a whopping $110,435 while those in Quebec say they estimate the cost will only amount to $33,738.
READ MORE: The biggest money mistakes Canadians make
Moran said how much parents or guardians need to save these days in order to be able to afford a post-secondary education for their child really depends on several factors.
Some of these factors include:
- Where will the child attend post-secondary school? Note: tuition fees vary from province to province
- What type of post-secondary institution the child will attend?
- How long they will attend?
- Will the child (or children) live at home while they study?
- How will tuition costs change?
While experts say it’s difficult to say how much a child should have in the bank at the start of post-secondary, online resources, like this RESP savings calculator, give parents a rough idea of how much an education might cost.
The tool allows you to choose the province of study, the number of years your child is expected to study, the current tuition value and whether the child will live away from home.
The biggest mistakes
Experts say three key “mistakes” parents make when it comes to saving for their child’s post-secondary education include the following:
- They didn’t save any money at all or they started too late
- They are saving but not planning: How does your education savings fit into your overall financial plan?
- Sacrificing retirement savings for education savings
“Retirement savings should trump education savings as a priority,” said Chung. “Your child will be able to work at the same time they are going to school; they will have access to loans, and so forth. You will not have other opportunities in retirement to increase your cash flow.”
Saving money toward a child’s education is not always easy.
“During that tighter cash flow period, it’s a great idea to invite grandparents, siblings, uncles, aunts and other relatives to contribute to the RESP as gifts rather than purchase toys,” said Chung.
“Recognizing their contribution in a scrapbook or album of some kind to be given to the child when they start post-secondary school can help encourage these kinds of contributions and encourage gratefulness in your child.”
– with a file from Heather Loney, Global News
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