(TORONTO, ON) – A recent BMO study showed that Canadian parents are expecting to pay close to half (42 per cent) of their children’s post-secondary expenses, including tuition, books, and living expenses. But parents may be biting off more than they can chew. The projected costs for a child born in 2014 are expected to top $140,000 for a four-year degree.
But it wasn’t always this way. Education was such a government priority in the 1960s that tuitions were reduced to token levels. However, economic conditions and government priorities changed after the 1980s and as a result, post-secondary funding was severely reduced. The figures below show a dramatic increase in tuition costs:
- In 1992, the average tuition for a year undergraduate study cost $1,772.
- By 2006, the price increased to $4,870.
- In 2014, Canadian students paid an average of $5,772.
So how are parents dealing with sky-rocketing tuition?
BMO found that two-thirds (66 per cent) of parents have started a Registered Education Savings Plan (RESP) – a significant increase from 2012, when only 52 per cent of parents had set up a RESP.
“Worrying about looming tuition costs can be a stressful burden on parents,” says Jeff Schwartz, Executive Director of Consolidated Credit Counseling Services of Canada. “But putting aside manageable amounts each year can help to head-off those costs and prepare parents for whatever the future might bring.”
Consolidated Credit offers the following advice to parents wanting to share the cost of education:
- Start early – In order to enjoy the long-term benefits of an RESP, parents should start it up as soon as they can. Compounding returns will reward parents who are in it for the long-haul; parents who start late may not see as much growth.
- Start small – You don’t need to break the bank each month when paying into an RESP, particularly in the early days. Young parents should add what they can afford and they can always increase payments when they become more financially secure.
- Don’t forget about today – Many Canadian parents hope to support their child’s education, but that doesn’t mean they can actually afford to. Get your financial house in order first and pay down your debts. A robust RESP is an ideal scenario, but don’t ignore your day-to-day expenses.
- Redirect gift money – Grandparents might be inclined to give cash to a child as a birthday gift, but it’ll likely be squandered at the ice cream store. Parents could encourage family members to make their gifts truly count by contributing to the child’s education.
- Get the government to pitch in – Some parents are not aware that the government will add to your RESP through the Canada Education Savings Grant. The grant will match 20 per cent of the first $2,500 contributed annually to a maximum of $500 a year.
“Despite growing costs, countless studies have shown that post-secondary education is a worthwhile investment,” says Schwartz. “Parents can help out by contributing within their means, and it will go a long way in painting a bright future for their children.”
About Consolidated Credit Counseling Services of Canada, Inc.:
Consolidated Credit Counseling Services of Canada is a national non-profit credit counselling organization that teaches consumers about personal finance.
For more information or to request an interview with Jeffrey Schwartz, please contact:
Jacob MacDonald, Public Relations Coordinator, Consolidated Credit Counseling Services of Canada, Inc., T: 416-915-7283 ext.1079, C: 647-390-5253, F: 416-915-5200, E: firstname.lastname@example.org