Study: Education and retirement saving behaviours of families

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Many families face competing priorities when it comes to savings. Despite these challenges, parents in all income groups place a high value on saving for their child's postsecondary education.

This study, based on data from the 2009 Canadian Financial Capability Survey, found that the likelihood that parents save for their child's postsecondary education is influenced by several factors, including cost of tuition, level of parental education and household income. Parents, in the context of this study, are defined as persons who are financially responsible for a child under the age of 18.

Not surprisingly, the proportion of parents who had saved for their child's postsecondary education increased with income, and was highest among parents in the highest income group.

To analyze the data by income level, households were divided into five groups or "quintiles" based on household income. Each quintile represents one-fifth of all surveyed households.

Over 8 in 10 (83%) parents with a yearly household income greater than $120,000 had saved for their child's postsecondary education. This proportion fell steadily for each lower quintile. Even so, 48% of parents falling into the lowest income quintile, those earning less than $32,000 a year in 2008, had such savings.

Even in households with the lowest incomes, proportionally speaking, more parents were putting aside money strictly for their child's postsecondary education than were preparing financially for their retirement only.

About 26% of households falling into the lowest quintile of the income distribution said they were saving just for their child's postsecondary education, compared with 14% who said they were preparing financially for their retirement only. An additional 21% were doing both.

However, 39% of parents in the lowest income group reported they were not preparing financially for their retirement nor had they saved for their child's education. Among parents at the top of the income distribution, 2% were not preparing for either.

Note to readers

The Canadian Financial Capability Survey (CFCS) was designed to collect information about Canadians' knowledge, skills and behaviours towards financial decision-making. In addition to collecting information on approaches to money management and financial planning, information was collected on various savings behaviours, such as saving for postsecondary education and retirement.

The Canada Education Savings Grant is a grant from the Government of Canada to help parents save for a child's postsecondary education. When saving in a child's Registered Education Savings Plan, the Canada Education Savings Grant could add up to $200 on the first $500 saved annually for each child and up to $400 on the next $2,000. In 2009, the maximum life-time grant for each child was $7,200.

In order to determine whether postsecondary education savings are adequate, data on amounts saved and the intended beneficiaries are needed. This information is not available through the CFCS.

"Preparing financially for retirement"' may include planning to use government pension benefits, such as the Canada Pension Plan or the Quebec Pension Plan; occupational or workplace pension plans; personal retirement saving plans; obtaining a reverse mortgage; selling financial or non-financial assets; using an inheritance; or planning to work.

As incomes increased, so too did the percentage of parents who were saving for their children's education as well as preparing financially for their retirement.

There was a close relationship between saving and the education level of the parents. About 45% of parents without a high school diploma had savings for their child's postsecondary education. This compares with 63% of parents whose highest level of education was a high school diploma and 78% among those with a university undergraduate degree.

In addition, the proportion of parents who had saved for their child's postsecondary education was strongly related to average undergraduate tuition fees for full-time students.

The highest proportions of such savers were in Alberta (78%), Ontario (74%) and Nova Scotia (73%). These three provinces also had the highest average undergraduate tuition costs in 2009/2010.

About 66% of parents who had saved for their child's postsecondary education had contributed to a Registered Education Savings Plan. The second most-common approach, taken by 28% of parents, was to contribute to a dedicated savings plan or account.

A second article in the May 2011 issue of Education Matters: Insights on Education, Learning and Training in Canada, "Public School Indicators for Canada, the Provinces and Territories, 2000/2001 to 2008/2009" examines trends in enrolment and educators in publicly-funded elementary and secondary schools over the 2000/2001 to 2008/2009 period, by province and territory.

The article "Competing Priorities: Education and Retirement Saving Behaviours of Canadian Families" is now available in the May 2011 issue of Education Matters: Insights on Education, Learning and Training in Canada, Vol. 8, no. 1 (81-004-X, free). In Browse by subject, click on Education, training and learning, and then Education Matters under Featured Products on the right.

For more information, or to enquire about the concepts, methods or data quality of this release, contact Client Services (toll-free 1-800-307-3382; 613-951-7608; fax: 613-951-1333;, Tourism and the Centre for Education Statistics Division.