Financial planning starting at a young age, survey finds.

(November 18, 2002) The vast majority of Canadian parents are emphasizing the importance of financial planning to their children, a survey released today suggests. Bank of Montreal’s second annual Registered Education Savings Plan poll reveals that 90% of parents with children between the ages of eight and 16 are teaching them financial planning skills.

Those lessons appear to be paying off: 85% of children say they are saving money and 35% have already put away money for their future education, a 10% rise from last year’s study. Perhaps surprisingly, nearly half the children questioned say they would even give up video games or their allowance to help their parents pay for their education.

“With the turbulent financial markets, saving for an education as early as possible becomes even more important,” says BMO vice-president Linda Knight. “By encouraging children to save for their own future, Canadians are teaching them the value of an education and the financial planning skills will help children throughout their lives.”

The study found that nearly half of Canadian parents are using an RESP to save for their children’s education, about the same number as last year. Of those who weren’t using an RESP, 69% said they would consider it after having the Canada Education Savings Grant and certain tax advantages explained to them. Under the CESG, the federal government tops up RESP contributions by 20%, to a maximum of $400 per year until the child reaches age 17. RESPs are not taxed until the funds are withdrawn to pay for the student’s education.

Two-thirds of parents believe they will be able to afford a college or university education for their children, with 40% estimating the cost at between $25,000 and $50,000 per child. That estimate may be on the low side, especially for those with young children. BMO economists forecast that a four-year post-secondary education in Canada will cost about $96,000 in 18 years.

Acrobat Results Marketing conducted the survey for BMO last month, interviewing 500 parents, from a variety of age and income groups, with children between eight and 16.

Filed by Doug Watt, Advisor.ca, dwatt@advisor.ca.

(11/18/02)