Nine in ten Albertan parents start saving for their children’s post-secondary education shortly after they’re born, according to a new survey.
According to the TD Canada Trust 2011 Education and Finances Survey, Alberta parents with children under 18 years old are the most likely in the country to expect their children to work to pay for their post-secondary education (46 percent versus 31 percent nationally), secure a scholarship (44 percent versus 26 percent nationally) and get a student loan (39 percent versus 25 percent nationally).
“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 Canada Trust District Vice-President Doug Semler. “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 expecting their kids to help contribute to the cost.”
One-third of Albertan parents who have children that they expect to attend post-secondary education in the future have not started saving for it. As a result, only 8 percent of parents plan to pay for the entire amount.
“If your child is heading to university or college this fall and you haven’t managed to save enough money, there are financing options available to your child such as government loans, scholarships, bursaries and grants. To assist with any financial shortfall, they may also qualify for a student line of credit from their bank. This is a smart way to ensure students have access to money for things like books, tuition and rent – at a lower interest rate and longer repayment term than a loan or credit cards,” says Semler.
Nationally, seven in ten parents who have children eligible in 16 and above years to attend post-secondary education (71 percent) have already started saving, compared with 55 percent of parents whose children are eligible now, 57 percent who will be eligible in 1 to 5 years, and 60 percent who will be eligible in 6 to 10 years. Nine in ten (89 percent) parents under the age of 35 years old started saving for their child’s education shortly after their birth, compared with only 60 percent of parents currently aged 45 to 54 years old and 80 percent of parents aged 35 to 44 years old.
“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 and take advantage of tax deferred growth,” says Semler. “And if you haven’t managed to save enough when your child is ready for post-secondary study, there are flexible and cost effective options that can help fill the gap, like a student line of credit.”
The number of Albertan parents putting money aside to invest for post-secondary education has increased since last year. The majority are planning to finance their children’s post-secondary education with a savings plan (64 percent versus 59 percent in 2010) and more than one-third plan on using a savings account or other investment products (36 percent). Only 10 percent plan on using a student line of credit.
When it comes to saving for their post-secondary education, parents – especially those in Alberta – are counting on their kids to chip in. Three-quarters of Albertan parents said that they feel good about helping their kids out, but they think it is important for their child to help contribute towards the cost of their education.
Only 8 percent of Albertan parents plan to fund 100 percent of their children’s post-secondary education. The majority plan to pay for the essentials like tuition, books and rent but expect their child to pay all other expenses (44 percent), or plan to pay for most of their children’s expenses but expect them to contribute some of their earnings from activities like summer jobs (41 percent).
“Opening a student line of credit gets your child involved in contributing to the cost of their education, and it’s a good first step to help them establish financial responsibility and build a credit history,” says Semler.
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