Why we should save for more than university.
Over the last year, my writing with W.R. Morrison has sparked some interesting debate about the role and future of universities in Canada. We have been frequently surprised by which ideas in Campus Confidential are deemed controversial and which are not. But it has been most striking to detect the growing unease at the powerful hold universities have assumed over our culture.
During a CBC radio interview, a listener in the Yukon heard me argue that parents were overly pressuring their children to attend university, in part by putting aside money each year in a Registered Educational Savings Program (RESP) account. He wrote me and told a simple story. He did not want to go to university but bent to his parents’ will that he attend. He got a degree, taking seven years to complete five years of study, worked for a while, got an IT certificate, worked some more and then finally pursued his preferred career. Fifteen years later, he got the job he wanted. It did not require a university degree.
But the listener was writing not to pass judgment on his parents, but to tell me how he had fallen into the same university trap with his own daughter. When she was born, he and his wife did what is increasingly common: they set up an RESP account, put in some money and assumed that their girl would eventually head off to university.
As a policy measure, the RESP was not designed solely to help pay for university education. College degrees and diplomas and other certified post-secondary programs are also covered. But the assumption has grown that children will use the money for university tuition and living costs. Surveys show that the majority of parents want their children to go to university, placing much lower priority on college diplomas or apprenticeship programs. The result is that a savings policy with the laudable intention of encouraging savings for gaining post-secondary skills and knowledge has morphed into part of the broad overpromotion of university education as the best career-ready option for young adults.
It’s time to use the RESP to change that social message to parents and high school students. The program should be kept as a savings and tax-deductible incentive, and still made available for young people wishing to attend university and college. But the RESP must recognize that the interests of Canadians — and the Canadian economy — are broader than what the fund currently covers. It needs a new name, reflecting a new mandate.
The renamed Young Canadian Futures Fund would do that. It would put the significant sums from savings and government contributions — in the vicinity of $50,000 for many — into two other avenues of investment. First, young adults could use the money when they come of age to start their own business or purchase an existing business. Entrepreneurship is a key to national prosperity. Offering the Futures Fund as a source of start-up capital sends the appropriate signal of the value we place on taking risks. Second, the Futures Fund could be used to help young adults make a down payment on a home. Home ownership is also highly valued in Canada, but young people struggle in a tight market to find the funds to buy their first home.
There is an added benefit. The current RESP arrangements are extremely attractive to wealthy Canadians and less so to those with lower incomes. The narrow options of the existing plan — saving for the loftier educational rungs of university or college — may be part of what discourages lower-income families from setting aside money for their children (poverty, of course, is the greatest discouragement to savings). Broadening the choices to cover advanced education, the purchase of a business or home ownership could transform the RESP from what it is now — primarily a tax break for well-to-do Canadians, most of whom would send their children to university without the RESP — into a true future builder for young Canadians.
The policy goal of the RESP was to get families thinking longer term about their children’s future and to use the wonders of compound interest to give them a helping hand as they launched their careers. College and university are extremely valuable for the right students and should be supported. But so should entrepreneurship and home ownership. Thinking more broadly about ways to offer young Canadians a better future can do that.