While eight out of 10 Canadian parents claim they have a good understanding of the costs associated with a post-secondary education, a new CIBC poll finds that almost 75 per cent don’t really seem to grasp the actual cost of tuition.
What’s more, almost 40 per cent admit they don’t know what to budget for their children’s non-tuition costs, such as books, accommodation and living expenses.
“Our poll finds that most parents are unaware of the real costs of their children’s post-secondary education,” said Kathleen Woodard, senior vice president, Retail and Business Banking, CIBC.
“It’s stressful when you don’t know if you are on the right track or not. Have I saved too much, too little or just enough? Many parents think they know what to expect, but end up being surprised at the true cost.That makes it hard to budget and build a savings plan.”
Key poll findings include:
• As many parents underestimate (25 per cent) the yearly tuition cost as they overestimate it (22 per cent), with another 27 per cent admitting that they don’t know the actual cost.
• Only 20 per cent estimated the cost of tuition at between $6,000 and $9,999. That compares to an average of $6,191 in tuition for an undergraduate degree in Canada — ranging from as low as $2,660 in Newfoundland and Labrador to $7,868 in Ontario, the highest, according to the most-recent data from Statistics Canada.
• One in five (19 per cent) parents believe their children can get by on a monthly budget of less than $500. The mean estimate for non-tuition costs from the poll is $1,333 a month.
• Despite this wide variety of views, the vast majority of parents— 81 per cent — say they have a good understanding of the overall cost of post-secondary education.
A CIBC poll in August 2015 found that more than half of post-secondary students tapped their parents for additional support while at school because they ran out of money. The poll also finds that 39 per cent of parents with children enrolled or recently graduated, say it cost them more than expected, while 46 per cent said in hindsight, they should have started saving earlier.
While 76 per cent of parents saving for their children’s post-secondary school education have set up a Registered Education Savings Plan (RESP), many lack fundamental knowledge about RESPs.
“It’s never too late to start contributing to a RESP,” said Woodard. “Even if you skip a year or five years of putting money into the RESP, there are opportunities to benefit from the government grant. It’s certainly money that you don’t want to leave on the table.That extra $500 grant per year might be the difference of whether your child works part-time during school or can focus solely on their studies.”
• 53 per cent believe RESP contributions are tax deductible, which they are not.
• 45 per cent think money saved in an RESP can only be used for tuition; it can actually be used for any purpose, not limited to tuition, books and living expenses.
Here are five tips for parents:
1. Start early
2. RESP contributions can be made until children reach age 31
3. Explore all government grants - federal and various provincial governments have incentives for education savings that are administered through RESPs.
4. Set financial priorities and map out how to achieve them
5. Talk to a qualified expert - know the RESP rules, limits, over contribution penalties and map out an investing and withdrawal strategy.
