A new survey from RESP provider Knowledge First Financial finds that Covid-19 has had a negative impact on parents’ ability to save for their children’s education.
According to the survey, more than 40% of parents said the pandemic has taken a bite out of their education savings. One third of respondents said Covid-19 had already hampered their ability to pay for their children’s education and 25% said they’re considering changing their children’s education plans because of the pandemic.
Parents who contribute to group RESPs — a type of RESP that is no longer offered by Knowledge First — could be risking a large chunk of their savings if they can’t keep up with their contribution schedule as a result of the pandemic.
Group RESPs — also known as group scholarship plans — have come under fire for large upfront sales charges and high attrition rates. Parents who can’t make scheduled contributions may be forced to leave a plan, usually paying penalties and forfeiting the advance sales charge — which often amounts to thousands of dollars — in the process.
In April, investor advocacy group FAIR Canada called on the Ontario Securities Commission to “implement urgent measures” to protect subscribers in group RESPs who were unable to make scheduled contributions due to the pandemic.
“Canadians and particularly low and middle-income Canadians are in financial crisis,” FAIR said in a statement that called for the imposition of moratoriums on group RESPs’ default and cancellation terms, as well as penalties and forfeitures, in light of the pandemic.
Knowledge First exited the group RESP business in May of this year and now offers only individual RESPs, which allow for flexibility if a parent is unable to make a scheduled contribution.
“Half of Canadians worry about being able to save for their child’s post-secondary education if Covid-19 persists,” Carrie Russell, president and CEO of Knowledge First Financial, said in a release. “We want to ease parental worries and student stress by showing them how flexible, versatile and beneficial RESPs are.”
Knowledge First commissioned Phase5 to conduct an online survey of 1,000 Canadians from Nov. 9–13, 2020. Online surveys cannot be assigned a margin of error because they do not randomly sample the population.