Canada Life survey reveals less than a fifth are knowledgeable about savings vehicles' benefits and contribution limits
While the vast majority of Canadians know about registered education savings plans (RESPs), it seems not nearly as many are using the savings tool to their advantage.
In a recent poll of around 1,500 Canadians, Canada Life found that 92% were aware of RESPs. However, just about half (49%) currently take advantage of the tool, and only 17% of respondents said they were knowledgeable about the contribution limits and benefits associated with the plans.
“With the rising cost of post-secondary education, a RESP can be one of the most effective ways to save for your child's education while helping them avoid excessive student debt in the future,” said Paul Orlander, executive vice-president, Individual Customer at Canada Life. “At the same time, many Canadian parents need expert guidance and financial advice to help make the most of RESPs.”
The poll affirmed that planning for education is a top financial priority among parents. While respondents with kids under 18 rated it second only to retirement, Canadians without children ranked education ninth on their list of priorities.
Among respondents who knew about RESPs, just 49% said they’re currently making contributions to or have made contributions to one, with the average total contribution amounting to $22,800. A reported 49% said they contribute monthly to a RESP account – the median monthly contribution is $210 – compared to 29% who make annual contributions.
When asked what other tactics they or tools they use to save for education, roughly two fifths of respondents (39%) cited in-trust or bank accounts in their child’s name, while 27% said they turn to Tax-Free Savings Accounts.
The poll also found that parents might be grossly underestimating the future costs of education that they’d eventually have to pay. Figures from Knowledge First Financial indicate that by 2030, the average four-year post-secondary degree will cost about $111,698 with residence and $55,548 without residence. In contrast, participants in the Canada Life survey projected that it would cost about $55,070.
Knowledge First Financial states that by 2030, the average cost of a four-year post-secondary degree will be about $111,698 with residence and $55,548 without residence.1 When surveyed by Canada Life, Canadians estimated it would likely cost about $55,070.
"An advisor can assist in opening a RESP and help [Canadians] maximize all of its benefits," Orlander said.