University fees are steep, and paying for them can be a financial challenge for students and their families. This year, it’s especially difficult, as the COVID-related disruptions have caused financial problems for families across the country. In this article, we’ll be delving into how the current health crisis has affected educational savings.
Financial Concerns for Families
CTV News reports that more than 40% of parents have stated that the pandemic has made it difficult for them to save up. So much so that they’ve had to take a portion of their education savings. This is, no doubt, due to multiple businesses closing down and laying off thousands of employees. But even those who still have their jobs have much to worry about. One of our contributors, Logan Leo, writes that many companies intend to freeze salaries by next year. This puts the estimated 2020 national average wage increase at a mere 1.6%, down from last year’s 2.4%.
As for current students, strict lockdown and social distancing guidelines have barred them from looking for summer jobs. Often, their earnings from these jobs help pay their university fees, so this is a cause for another dip in income.
Even the investment scene offers no respite. Given the economic downturn, market values are plummeting. And for families contributing to Registered Education Savings Plans (RESP), this could prove dire for the future of their children’s education.
The State of RESPs
A Registered Education Savings Plan is an ideal way for parents to save for their children’s post-secondary education, primarily because of their tax-free benefit. There are three types of RESPs that parents and students can apply for each with their own benefits. For instance, the Canada Education Savings Grant program promises to add 20% to any RESP contribution, with a maximum of $2,500 per child every year — yet another reason why RESPs are so appealing.
However, the value of RESPs has decreased since the pandemic began. This is because the funds are invested for them to grow over time. Regulators use RESP contributions for mutual funds, stocks, bonds, and other investment options that they feel could yield more capital. But with market values plummeting, it’s becoming more and more difficult to make smart investments. This poses yet another problem for families hoping to save enough by the time their children enter university.
Government Support — Present, But Lacking
Luckily, the government reacted quickly by providing different financial support programs for parents as well as current students. An article on Global News writes about a new caregiver benefit, which grants parents $500 per week if they are forced to miss work to care for a dependent. This arrangement can be applied for up to 26 weeks. Meanwhile, the Canada Student Service Grant is available for university students, who can avail of as much as $5,000. Unfortunately, these grants pale in comparison to tuition costs, which average at $6,800, and this rate does not include textbooks, food, or rental fees.
Overall, it’s a challenging time for those saving up for educational purposes. The pandemic has made it difficult for Canadians to save, but this is especially the case for parents.