TORONTO, Sept. 23 /CNW/ - Nearly one-in-four (22 per cent) Canadian parents with children under 18 are saving equally for their own retirement and their children's post-secondary education, according to a new poll commissioned by Edward Jones Canada. However, seven out of 10 parents are choosing one over the other - or none at all.
Fifteen per cent of parents with children under 18 at home are favouring their child or children's education over their own savings, putting aside little or nothing for their retirement. On the other hand, nearly three out of 10 (26 per cent) parents are primarily saving for retirement and only saving a little for post-secondary school for their child or children. Another 26 per cent say that they are not saving for retirement or for their child or children's post-secondary education.
"While we are pleased to see that a number of Canadian parents understand the importance of saving for both their own long-term financial needs, as well as their children's, we are concerned that a large number of parents seem to be choosing one over the other" says Michelle Kay-Scott, senior retirement planning specialist for Edward Jones Canada. "Anyone balancing these two hugely important financial goals - education and a comfortable retirement - needs to be sure that they are clear about what kind of financial planning is needed to achieve both of these goals."
According to CanLearn, an online Government of Canada resource, in 2015 an average year of tuition will cost more than $12,000 for those who stay at home and more that $21,000 for students that choose to move away from home. Tuition is expected to increase an average of $2,000 to $3,000 every five years. For those who decide to pursue a 4-year honours degree away from home in 2015, the cost could be approximately $84,000.
Meanwhile, when it comes to retirement, Edward Jones suggests that it's a prudent idea for investors to assume that they'll likely need between 70 and 90 per cent of pre-retirement income to maintain a current standard of living in retirement.
"When you look at the numbers, it means some careful planning is required. It is not enough to passively put away money each month and hope for great returns - it means really staying on top of your portfolio and balancing financial needs with the right financial choices. It also means working with an expert to lay out clear goals," says Kay-Scott.
She offers the following tips to help parents balance:
Define your financial goals, and create a financial plan based on these - In trying to achieve your goals, ensure that your investments are appropriate for your needs and risk tolerance, and that your portfolio is properly diversified. Education funding may be a shorter-term goal than retirement planning, and assets should be allocated accordingly. Investors should speak to an expert to determine what suits their individual portfolio.
Set-up RESPs for your children - To keep up with the rising costs of tuition, parents can contribute to a Registered Education Savings Plan (RESP) that offers tax benefits and great growth potential with contributions from the Government of Canada.
Save for your retirement in a designated account, such as an RRSP - Just as your money needs to grow to fund your child's education, you have to do the same for your retirement. An RRSP is a great retirement savings vehicle that allows savings to grow while sheltered from taxes.
"Planning is the key to financial success - a financial plan is like a road trip, unless you know where you are going, you are not going to reach your destination," says Kay-Scott. "Just as you would before you hit the road, map out your goals, and create a plan of how you'll get there. Your financial advisor can help you do this."
About Edward Jones
Edward Jones is a full-service investment dealer with one of the largest branch networks in Canada. It is a member of the Investment Industry Regulatory Organization of Canada and the Canadian Investor Protection Fund, and a participating organization of the Toronto Stock Exchange. Including its affiliates, Edward Jones serves more than 7 million individual investors in Canada, the U.S. and the United Kingdom from more than 10,000 locations.
Edward Jones Limited does business in the Canada as Edward Jones and is a wholly owned subsidiary of Edward D. Jones & Co. LP, a Missouri limited partnership. Edward D. Jones & Co. LP does business in the United States as Edward Jones and is a wholly owned subsidiary of The Jones Financial Companies, LLLP, a limited liability limited partnership.
The Canadian survey results are based on a telephone survey of 2,348 nationally representative adults with retirement savings between July 27 and August 13 by Leger Marketing. A sample of this size will provide results that can be considered accurate within plus or minus 2 per cent, 19 times out of 0.
SOURCE Edward Jones
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