Saving for a child’s education is the most important savings goal of Canadian parents according to a 2008 poll. In fact, over 73 per cent of Ontario children under 18 have parents who have saved for future post-secondary studies, up from less than half just a decade ago. Amid a changing economy and rising costs for post-secondary education, this is good news.
The most common savings vehicle is the Registered Education Savings Plan (RESPs). Introduced in 1972, RESPs allow for savings to accumulate tax free, and the federal government has since introduced non-repayable incentives to encourage their use. In large part, the program has been a success.
According to Statistics Canada, close to half (47%) of Canadian children had savings held in RESPs in 2008. This is a significant increase from past results of 18% in 1999 and 29% in 2002. The proportion of children with RESP savings was higher in Ontario (51%) and increases in younger age cohorts. The Canadian University Survey Consortium’s triennial survey of first-year students shows the proportion of students using RESPs to finance their education is on the rise. Most telling of all, the total assets held in RESPs has increased from $4 billion in 1998 to $26 billion in 2009.
Despite their rising popularity though, RESPs continue to be disproportionally used by families that are more educated and have higher incomes. The table below shows the proportion of children under 18 with post-secondary savings and those with an RESP from Statistics Canada’s 2008 Access and Support to Education and Training Survey. Family income and parental education continue to dramatically impact the likelihood of having an RESP – high-income families are two-and-a-half times more likely to make use of them than their low-income counterparts.
| Have post-secondary savings | Have RESP | |
| Family Income | ||
| Less than $25,000 | 42% | 24% |
| $25,000 to $50,000 | 54% | 30% |
| $50,000 to $75,000 | 64% | 41% |
| $75,000 to $100,000 | 71% | 51% |
| $100,000 or more | 83% | 63% |
| Parental education | ||
| Less than high school | 37% | 18% |
| High school diploma | 59% | 35% |
| Post-secondary certificate | 72% | 52% |
In some ways, it is inevitable that a savings vehicle will be accessed less frequently by those with less income available to be saved. Another Statistics Canada study from just last week confirms that many low-income families are struggling to save for both retirement and post-secondary education – the proportion saving for both jumps from 21 per cent in the lowest-income families to 78 per cent in the highest-income families.
However, the Canada Education Savings Grants (CESGs) and Canada Learning Bonds (CLBs) were both designed to increase participation and saving among lower-income families, but have yet to have the desired effect. The CLB in particular has failed to reach its potential. It initially provides $500 and $100 annually thereafter to low-income children (family income below $38,832) regardless of whether parents contribute, but only 19% of eligible children received the CLB in 2009. Similar matching programs exist in several other provinces – an idea worth considering here in Ontario.
RESPs have certainly received a lot of attention lately, particularly with the Liberal Party of Canada’s promise in the last election to use them as a vehicle to deliver more student aid. But before provincial or federal governments consider putting more resources into such a program, we should be sure that it will have the kind of impact we hope for. Considering the critical importance of equal access to post-secondary education, it is worth considering why the benefits of RESPs continue to be accessed unequally and what steps could be taken to improve the situation.
Lack of income certainly has something to do with it, but information plays a key role as well. In March 2008, EKOS Research Associates Inc. conducted a survey of low-income families. They found that while 83% of respondents had heard of an RESP, only 54% were able to define it. Only one-third of respondents had heard of CESGs, and only one in twelve correctly understood how the grants operate. Lack of awareness was lowest for the CLB, where only 1 in 10 had heard of the CLB, and 59% of those who had could not provide any further details. A lack of communication on the RESP process and operations has been cited as a key hurdle in improving participation.
A common response to such findings is to make registration for the CLB, or even an RESP, automatic. The idea certainly has merit, but it has both logistical and privacy implications that would need to be tackled by the federal government and the many financial institutions that offer RESPs. In the mean time, if the Government of Ontario wanted to encourage saving for post-secondary education, there are several opportunities to encourage families to sign-up that are under provincial control. The most obvious possibility is to have families register for an RESP for their child when they apply for a birth certificate. Other opportunities exist as well, such as when a child is first registered to attend school in Ontario or when a parent first reports a child on their tax return. By placing RESP registration and information alongside opportunities where the Province has direct contact with parents, it may create an atmosphere that these saving vehicles are an expectation, not a luxury.
While there may be some logistical barriers to work through, it’s a simple idea that would cost the Province next to nothing, and that could have a large impact on participation in the program. For a government that has prioritized access to education, encouraging parents to give every child a head start seems like too good an opportunity to pass up.
-Sam Andrey
Executive Director













