For new parents, here’s the bottom line. If you don’t get serious about saving for post-secondary studies, that cooing little bundle is almost certainly going to be severely burdened by student debt.
If current trends continue, a four-year degree is likely to cost $80,000 for live-at-home students by 2025 and $125,000 for those away from home.
The good news is that new parents are putting aside those education pennies. Across Canada, nearly 90 per cent of those with young children have started saving, according to the TD Canada Trust 2011 Education and Finances Survey.
The goal for those with younger children should be to get the maximum Canada Education Savings Grant of 20 per cent on the first $2,500 annually per child contributed to an RESP (Registered Education Savings Plan). That’s a little over $200 monthly. Even if you just invest the money in GICs and bonds you’ll have about $40,000 after 10 years and nearly $90,000 after 18.
For parents of teens, education financing is a big stress point. TD’s survey discovered that more than 85 per cent of parents (at least in Ontario) with kids under 18 don’t expect to be able to pay the shot for their children’s education.
Interestingly, fewer of those parents expect their children to help pay for their own education, 31 per cent down from 39 per cent last year. The decline may have to do with the difficulty in finding summer jobs.
My daughter, a student chef, has only managed irregular shifts so far this summer at two different restaurants.
Parents with teens, and little in the way of savings, might consider postponing education. A couple of years of living at home and working, even at a minimum wage job, could easily mean the difference between a decade of debt and a nearly debt-free degree.
Working roughly 35 hours a week at minimum wage will bring in about $20,000 annually. Saving 75 per cent of that over two years is $30,000. For a live-at-home student-to-be, that money, along with RESP savings, will go a long way to reducing student debt.