Education costs often come at a time when parents are trying to get their own finances in order, setting back plans for debt reduction and retirement
TORONTO, Aug. 22, 2013 /CNW/ - A CIBC (TSX: CM) (NYSE: CM) poll conducted by Leger shows that more than one-third of Canadian parents with children under the age of 25 will have to delay retirement because of the cost of helping their children pay for their education. Many parents have saved less for retirement than they originally planned, and some have taken on additional debt to help pay for tuition and other expenses.
Key findings of the poll include:
- 60 per cent of Canadian parents with children under 25 have saved less for retirement than they had planned for, because they've directed some of their retirement savings towards their child's education instead
- 33 per cent say they have incurred additional debt in helping their children finance their education or with other needs
- As a result, 36 per cent of Canadian parents surveyed with children under the age of 25 say they will need to delay their own retirement
- Within this group, 19 per cent are planning to delay retirement by five or more years
- 16 per cent are planning to delay retirement by one to four years
"Many Canadians are focused on building retirement savings or reducing debt, but the costs you can incur when helping your children with college or university can impact both of those goals," said Christina Kramer, Executive Vice President, Retail Distribution and Channel Strategy, CIBC. "The expenses associated with a child's education often come when parents are in their 40s and 50s and are looking to accelerate retirement savings. This means some parents will need more working years to close the gap created by the costs of their child's education."
Student Debt is often "Parent Debt"
At the start of 2013, paying down debt was named the top financial priority for Canadians for a third year in a row. Today's research shows that one-third of Canadian parents with children under 25 have taken on additional debt to help pay for their child's education.
"It can be a challenge for parents who are trying to turn the corner on their own debt to borrow more to help pay tuition bills, which is why it's so important to talk to an advisor and build education costs into your long term plan when you still have time on your side to save and pay down other debts," noted Ms. Kramer.
Having a Plan is Critical
To manage the costs of education, it pays to have a plan and start early. "Saving for your child's education is just like saving for your retirement - the sooner you start, the more time you'll have, and the more manageable your monthly contribution will be," noted Ms. Kramer.
To help parents achieve their goal of helping their children with their education, Ms. Kramer offered the following advice:
- Understand your total financial picture - work with an advisor to look at both your debt management and your savings plans, and ensure you have accounted for education savings
- Manage debt effectively - ensuring that your mortgage payment and other obligations give you room to allocate money towards savings will make it easier for you to find the money you'll need to put away each month
- Use an RESP - talk to an advisor about using an RESP to build your children's education savings faster, taking advantage of the Canada Education Savings Grant to build your investment
Among Canadian parents surveyed with children under the age of 25 who have put money towards their child's education or other needs, by region:
|Saved less for retirement|
Among Canadian parents surveyed with children under the age of 25, by region:
|Will delay retirement|
Among Canadian parents surveyed with children under the age of 25 who will delay retirement, by region:
|Delay retirement by 1-4 years||Delay retirement by 5 years +|
Results are based on a CIBC poll conducted online by Leger, which surveyed 1,000 Canadians. The associated margin of error for a probabilistic sample of the same size is +/-3.1%, 19 times out of 20. Polling was conducted between June 9 and 12, 2013.
CIBC is a leading North American financial institution with nearly 11 million personal banking and business clients. CIBC offers a full range of products and services through its comprehensive electronic banking network, branches and offices across Canada, and has offices in the United States and around the world. You can find other news releases and information about CIBC in our Press Centre on our corporate website at www.cibc.com.