July 19, 2011 (Toronto, ON) -- As the next generation of high school graduates prepare to make the leap to college and university life this fall, many will have to secure alternative ways of funding their education outside of their parents’ pay cheques.
According to the TD Canada Trust 2011 Education and Finances Survey, almost one-in-two parents who have children eligible to attend post-secondary education this fall have not started saving for their children’s post-secondary education (45%). As a result, one-in-three parents with children eligible to start post-secondary education now anticipate they will only be able to contribute to less than 10% of the cost.
“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 Shahz Beig, Associate Vice President, Personal Lending, TD Canada Trust. “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 struggling to make ends meet.”
The survey found only 12% of Canadian parents with children under age 18 plan to fund 100% of their children’s post-secondary education. Half plan to pay for most of their children’s expenses but expect their children to contribute some of their earnings from activities like summer jobs (49%), while one third plan to pay for the essentials like tuition, books and rent but expect their children to pay all the other expenses (32%).
“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 Beig.
Baby’s college funds grow in popularity
Interestingly, it's the newest Canadian parents who take home top marks when it comes to saving early for their children’s education.
Seven-in-ten parents who have children eligible in 16+ years to attend post-secondary education (71%) have already started saving, compared with 55% of parents whose children are eligible now, 57% who will be eligible in 1-5 years, and 60% who will be eligible in 6-10 years. Nine-in-ten (89%) parents under age 35 started saving for their child’s education shortly after their birth, compared with only 60% of parents currently aged 45-54 and 80% of parents aged 35-44.
“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, being diligent about putting away a little bit with each pay cheque into a Registered Education Savings Plan (RESP) will help you take advantage of tax deferred growth,” says Beig. “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 majority of Canadian parents with children under age 18 are planning to finance their children’s post-secondary education with an RESP (62% versus 53% in 2010). Almost one-third plan on using a savings account or other investment products (32% versus 28% in 2010), and only 10% plan on using a student line of credit.
Saving is a team effort
When it comes to saving for their post-secondary education, parents are counting on their kids to chip in – but not as much as last year. Many expect their children to work to pay for their post-secondary education (31% versus 38% in 2010), secure a scholarship (26% versus 32% in 2010), and get a student loan (25% versus 29% in 2010).
“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 Beig.
For more information and advice on how to pay for school and manage student finances, please visit http://www.tdcanadatrust.com/student/index.jsp
About the TD Canada Trust 2011 Education and Finances Survey
The TD Canada Trust 2011 Education and Finances Survey polled a representative sample of 640 Canadian parents of children aged less than 18 years through a custom, online survey. The survey was conducted by Environics Research between June 10-20, 2011.
About TD Canada Trust
TD Canada Trust offers personal and business banking to more than 11.5 million customers. We provide a wide range of products and services from chequing and savings accounts, to credit cards, mortgages and business banking, to credit protection and travel medical insurance, as well as advice on managing everyday finances. TD Canada Trust makes banking comfortable with award-winning service and convenience through 24/7 mobile, internet, telephone and ATM banking, as well as in over 1,100 branches – most open 8 ‘til late and many now open Sunday. For more information, please visit: www.tdcanadatrust.com. TD Canada Trust is the Canadian retail bank of TD Bank Group, the sixth largest bank in
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