Econintersect: A Bank of Montreal (NYSE:BMO) study found that more than half of all Canadian parents have opened RESPs (Registered Education Savings Plans) for their children. A press release from BMO says that saving in advance is not surprising since a four year degree today costs more than $60,000 and is expected to be more than double than within the next 18 years.
In spite of 52% having opened an RESP and 70% believing it is important to open one as soon as a child is born, an even larger percentage of parents are unfamiliar with what they can actually do with the accounts and many do not believe they can afford to contribute.
Here is the complete press release from Marketwire:
September 15, 2012 09:00 ET
REPEAT-BMO Study: More Than Half of Canadian Parents Are Turning to RESPs to Help Fund Their Kids' Post-Secondary Education
- Two-thirds of parents think it's important to start saving as soon as a child is born
- More than 90 per cent unaware of what types of investments can be held in an RESP
- BMO offers tips on how to save for a child's post-secondary education
TORONTO, ONTARIO--(Marketwire - Sept. 15, 2012) - With school now back in session, BMO Investments Inc. today announced the results of a study which examines Canadians' awareness around saving for their children's post-secondary education.
The study found:
- Half (52 per cent) of Canadian parents have opened a Registered Education Savings Plan (RESP) for their children
- Seventy per cent believe it is best to set up an RESP as soon as possible after a child is born
This is not surprising given that post-secondary costs (including tuition, books and board) have been increasing steadily over the past decade. Today, a four-year university degree can cost upwards of $60,000. For a child born in 2012, the costs of a four-year university degree could reach $140,000.
"The costs associated with a post-secondary education can be daunting, so it's encouraging to see that a majority of Canadian parents appreciate the importance of planning and saving for post-secondary education," said Robert Armstrong, Vice President, Managed Solutions and Registered Plans Strategy, BMO Investments Inc. "Getting a head start on saving by opening an RESP when your child is born will help. A little goes a long way, with compounded return and government grants yielding considerable savings by the time a child's 17 years old."
The study revealed that there are still many parents who are not taking advantage of RESPs, with the biggest barriers to adoption being a lack of money and awareness. According to the study:
- Sixty per cent of Canadian parents believe they cannot afford to contribute to an RESP
- An overwhelming majority (93 per cent) of Canadian parents are not aware of the range of investments they can hold within an RESP
"A good RESP savings strategy, for those who are unsure about what to hold in an RESP, is to include investments that have a designated target maturity date," said Mr. Armstrong.
Mr. Armstrong noted that BMO offers BMO LifeStage Class Mutual Funds, which allow investors to choose different time horizons, from five to 18 years, when investing. The funds annually shift their asset mix from an emphasis on equity funds to an emphasis on fixed income and cash equivalent funds as they approach their end dates. "Invested in an RESP, these types of funds provide growth in the early stages and become progressively more conservative as the child approaches post-secondary age."
Mr. Armstrong added that parents who are finding it hard to come up with the money to contribute to an RESP have options, including making regular, small payments and encouraging relatives and friends to make contributions as part of a child's birthday/holiday gifts.
BMO offers the following tips for Canadians interested in opening an RESP:
Start early and make regular contributions: Start making regular contributions as early as you can. Government grants and compounded return can add significantly to an RESP's total savings.
Mix it up: Cash and mutual funds are not the only way to build up an RESP. Include a variety of investments such as guaranteed investment certificates (GICs), stocks, bonds and Exchange Traded Funds.
Speak with a financial professional: A financial professional can help you develop a financial plan that incorporates all of your short- and long-term goals, including saving for a child's education.
Inspire alternative gift-giving: RESP contributions make great gifts for special occasions so let friends and relatives (including Grandparents) know that you are receptive to receiving them for your child's future education.
To learn more about saving for education and RESPs, please visit: www.bmo.com/resp
Get the latest BMO press releases via Twitter by following @BMOmedia.
The online survey was conducted by Pollara among a sample of 800 Canadian parents with at least one child under the age of 18, between August 18th and August 24th, 2012. As a guideline, a probability sample of this size would yield results accurate to ± 3.5%, 19 times out of 20.
BMO Mutual Funds are offered by BMO Investments Inc., a financial services firm and separate legal entity from Bank of Montreal.
Commissions, trailing commissions, management fees and expenses all may be associated with mutual fund investments. Please read the prospectus of the mutual fund before investing. Mutual funds are not guaranteed, their values change frequently and past performance may not be repeated.