Higher education is a valuable opportunity for all Canadians. Not only can it increase income earning potential for many who pursue it, but post-secondary education can also be a route out of poverty for many people living on low incomes. The reality however is that only 30 per cent of students from the lowest income quintile end up attending post-secondary education. Even among those students with A+ averages, students from low-income families are 10 per cent less likely to attend post-secondary education than higher income students. For many families living on low incomes the financial cost of pursuing higher education is often a barrier.
Youth with savings are 50 per cent more likely to attend post-secondary education
Research has shown that having savings set aside for post-secondary education helps children perceive it to be within their reach. In fact, a person with access to financial assets including education savings, is more likely to graduate from post-secondary education, even if that savings is only $500. Post-secondary graduates also fare better in terms of labour force participation, employment and earnings, than do people with less education, even for those with degrees in non-STEM fields. However, the cost of higher education can negatively impact a family’s financial well-being, when it leads to increased debt and reduced savings.
This is why education savings tools like the Registered Education Savings Plan (RESP) and Canada Learning Bond (CLB) are so important, to help families living on low incomes build education savings for their children.
Growing support for education savings
It’s encouraging to see support for education savings growing across Canada. The federal government has made education savings a priority. In the Minister of Employment, Workforce Development and Labour Mandate Letter, the Prime Minister mandated that the Ministry work “collaboratively with provinces and territories to improve promotion of RESPs and Canada Learning Bonds, to make registration simpler, and to increase take up rates.” The ABLE community of practice has also endorsed the goal set by SmartSAVER to increase take-up of the Canada Learning Bond to 40 per cent of eligible beneficiaries. In British Columbia, the BC Training and Education Savings grant provides $1,200 into the Registered Education Savings Plan of children born in 2006 or later. There has also been growing support for Education Savings Week activities nation-wide.
Working in partnership to increase take-up of RESPs and the CLB
As part of the financial empowerment work we’re doing to improve the financial well-being of Canadians on low incomes, Prosper Canada is working to expand take-up of RESPs and the CLB through our national and Ontario Financial Empowerment Champions (FEC) projects. We’ll be working with FECs over the next five years to enrol 14,000 children in RESPs and the Canada Learning bond program across both projects. That’s 14,000 children that can potentially receive up to $2,000 free money towards their education! Our recommendation that federal departments invest nationally to advance the take-up of RESPs and CLBs also forms part of our 2017 pre-budget submission to the federal government. Since these savings tools also require participants to access mainstream financial services, this can also mean overcoming barriers to financial inclusion, such as accessing identification, direct deposit banking, or tax filing support.
The number of low and middle-income families with children accessing RESPs has increased, especially since the introduction of the Canada Learning Bond. By 2012, RESP take-up among families with the lowest income eligibility threshold had significantly increased to 30 per cent of eligible families, but too many Canadian families are still missing out on this education savings tool. It is vital that more Canadians access this asset-building opportunity. Investments such as these help to build a strong foundation to help people with low incomes improve their financial well-being and economic opportunity.
By Glenna Harris,
Curriculum and Content Writer at Prosper Canada.
