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Saving for an education: A challenge for a growing number of households

March 13, 2023, 11:00 a.m. (EDT)

A post-secondary education has long been associated with opening doors to higher wages and more career options. To cover the increasing cost of education, many Canadian households begin saving years in advance.

The cost of tuition is not getting any cheaper. Canadian undergraduate students paid an average of $6,834 in tuition fees for the 2022/2023 academic year, up 2.6% from 2021/2022. The $7,437 in average tuition fees paid by Canadian graduate students was up 1.7% year over year. International students paid significantly more.

Recently, record increases in the cost of living have put a squeeze on all household budgets, including the ability to put money away for education costs that may not be covered by a scholarship or bursary.

The Consumer Price Index rose 6.8% on an annual average basis in 2022, a 40-year high, following gains of 3.4% in 2021 and 0.7% in 2020. Transportation (+10.6%), food (+8.9%) and shelter (+6.9%) costs rose the most. Amid a higher interest rate environment, mortgage interest costs rose 2.6%.

In December 2022, average weekly earnings (including overtime) for all payroll employees economy-wide were up 3.4% on a year-over-year basis, behind the pace of inflation.

Findings from a recent Statistics Canada study indicate that close to half (44%) of Canadians in 2022 were very concerned about their ability to meet day-to-day expenses. For the bottom income quintile, the ratio was 6 in 10 (63%) Canadians.

Saving rate by income quintile

In the third quarter (July to September) of 2022, the average Canadian household had a net saving of $1,964 across all income quintiles, down from $2,455 in the third quarter of 2021.

The two lowest income quintiles had negative net saving in each of the first three quarters of 2022—ranging from -$1,928 to -$9,284. Even households in the third income quintile had a negative saving rate for the second quarter, while managing to save $971 in the first and $765 in the third.

On an annual basis, the net saving numbers for the lowest income quintile in the five years before 2022 were still in the red, dropping from -$26,121 per household in 2017 to -$31,098 in 2019. Most COVID-19 pandemic support programs had ended in 2021, when net saving dropped back to -$24,138 per household from -$19,384 in 2020.

Low participation rates in Registered Education Savings Plans for lower-income families

Even before the full effects of the pandemic and the subsequent increases in the cost of living took aim at household incomes and expenditures, saving rates for lower-income households were still outpaced by those of higher-income households.

The Statistics Canada analysis of Registered Education Savings Plans (RESPs) found that among families with children, those in the top 20% of after-tax income distribution held $22,052 in RESP investments in 2019, compared with $3,295 for those in the bottom 20%.

Perhaps the most revealing finding was that wealth (net worth) was the main factor in differences between the top and bottom income quartiles, accounting for 50% to 79% of the total gap. It suggests that many lower-income households may not be able put away even smaller amounts, despite government incentives to do so (a 40% matching contribution for the lowest-income families).

Contact information

For more information, contact the Statistical Information Service (toll-free 1-800-263-1136514-283-8300; or Media Relations (