I can think of 150,000 reasons why a lot of Canadians need to watch their spending, boost their savings, and sharpen their financial planning skills. According to a recent TD survey, the average cost of an undergraduate degree for children living away from home in 2031 is set to reach $150,000. No, that’s not a typo, it’s a correct figure and it’s about equivalent to the price of what some two and three-bedroom homes cost in some towns in northern Ontario.
It appears young parents and soon-to-be parents have some serious long-term financial planning issues to consider.
Lots of families in Canada will be dealing with the issues. As I mentioned in this blog last year quoting the Globe and Mail, eight out of every ten parents in Canada say they expect to cover costs for their kids’ college or university schooling. Since there’s nothing to indicate that ratio will change anytime soon, a couple of vital questions present themselves. First, in 18 years’ time will millions of Canadian families be equipped with the financial resources to deal with skyrocketing education costs? Second, in our credit-obsessed age, will they have the will and the skill to budget for savings and investments, and employ strategies for sound financial planning?
In terms of financial resources, I can find no reliable studies that show how much more Canadian families will be earning in 2031 over today’s average household income of about $76,000. But I have a sneaking suspicion that, on a percentage basis, wage rate increases will not match the education rate increases we’re looking at here. The $150,000 figure is a full third greater than the approximate $100,000 it currently costs on average to put a young man or woman through four years of university. Meanwhile, as to the money smarts and financial planning tools parents will need to apply to meet the challenges, let me just say that a whole lot of Canadians desperately need to improve their financial literacy skills, as so many studies show.
To help get kids educated, whole swaths of the parenting population need to be themselves educated about sound personal money management practices. Millions lack even basic skills in proper monthly budgeting, tracking spending, goal setting, debt management, and investment. Lists, strategies and plans need to be set down in writing and regularly reviewed and revised in accordance with changing economic winds and life circumstances. Credit Canada Debt Solutions tailored and extensive financial planning programs can provide great assistance to those willing to spend a little time and money for expert guidance in personal finance and debt management.
The need for financial realism factors into the picture, too. Big time. On this point, not so long ago Capital One Canada and my agency conducted a financial survey with findings that can only be described as alarming. We discovered that one-third of adult Canadians are counting on a lottery jackpot or a large (miraculously announced) inheritance to secure their financial future. To me that’s downright scary stuff.
TD offers three simple guidelines that can help get realistic – I’ll even say sane – parents on track to building an education nest egg. “First, save early by contributing small amounts regularly to a Registered Education Savings Plan (RESP) or a Tax-Free Savings Account (TFSA). Second, consider eligible grants. Third, build a plan.”
It’s a start.