Income not the only factor in saving for children's education

New research shows that income level is not the only factor affecting how much money parents save for their children's postsecondary education.

Data released Friday by Statistics Canada show that home ownership, parental expectations, children's ability and personal experience play significant roles as well.

The research agency found that saving for higher education is common across all income groups, even among those earning less than $15,000 annually. They note, though, that there are more than twice as many people saving in the highest-earning group ($40,000 plus annually) as in the lowest.

But Statscan says that income alone is not the only reason for the extra money saved by the higher-earning group, which had accumulated an average of $6,100 more than the lowest income group.

“Characteristics other than income explained about half of the [savings] difference,” Statscan said in a release issued Friday. They cite home ownership and higher education on the part of the parents as the key factors.

The research comes amid a long-running battle between student groups and the government over educations costs. Tuitions in most provinces have jumped substantially over the last decade and student groups have called for a freeze in fee raises and an expansion of student aid.

The Ontario government said earlier this week that the loans system would receive an immediate $20-million funding injection, available to student headed to colleges and universities beginning next month.

Training, Colleges and Universities Minister Mary Anne Chambers acknowledged that fees have gone up substantially since the early 1990s, even as access to financial assistance has declined.

Jesse Greener, Ontario chairman of the Canadian Federation of Students, said that the announcement will bring Ontario up to speed with the national standard. He applauded the move but said that a broader solution, with a focus on costs as well as loans, needs to be considered.

A report by the Educational Policy Institute, a think tank based in Toronto and Washington, found that average annual expenditures for a student doing undergraduate studies in Canada totalled $12,539.98 in 2002, compared with $9,271.87 in 1965 in constant dollars.

There are complaints that the rising cost of education has had the effect of restricting access to the poor. That argument is supported by Friday's Statscan data, which ultimately shows that the financially comfortable have the most ability to make up funding shortfalls for children headed to post-secondary education.

Parents who lived in a mortgage-free home typically saved more than those who had not paid off their homes, the research shows, even after controlling for income and other factors. For their part, parents in mortgaged homes had saved more than tenants, though the difference between those two was smaller.

The experience of parents with higher education is also relevant. The children of those who were university educated had a significantly larger pool of funds to draw on than the children of those who were not. University education, of course, tends to make people more employable and they tend to earn more money.

Friday's Statscan data comes from an article called “Saving for post-secondary education,” which appears in the July 2004 issue of Perspectives on Labour and Income.

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