Today’s Priorities VS Tomorrow’s Needs
September 24, 2015
My daughter recently informed me that she plans to ask Santa for an iPhone this year. Pampered since childhood, she has the chance to live in a family that meets all of her basic needs. She therefore obviously doesn’t expect to find an orange in her Christmas stocking like my parents did back in the day. But this request, seemingly trivial for a girl, inspired profound reflection on my part. Is this an appropriate gift for a child? Is this a necessary commodity? Should family money really go toward an iPhone?
The rapid rate at which communication technologies have evolved over the past few years has certainly contributed to transform the way families prioritize spending.
According to recent CROP firm survey1 commissioned by Kaleido, aside from their essential living expenses (groceries, healthcare, rent, etc.), telecom services are prioritized by nearly half the households in Quebec. More specifically, 68% of those surveyed said they would not be willing to cut back on their Internet bill, 45% on their cable bill, and 43% on their cell phone bill. This reality was particularly noticeable when it came to respondents aged 18-34 years, of whom 52% see their mobile phone as indispensable.
These results don’t come as a surprise. Given the increasing popularity of smart phones, which usually have higher fees, we can expect families to include these expenses in their household budget.
The importance of telecom expenses was followed by those for vacation trips, deemed indispensable by 30% of those surveyed. Moreover, despite these times of economic austerity, nearly a quarter of the respondents prioritized their savings in the RRSP (23%) and the TFSA (21%), outranking restaurant outings at 20%. Finally, to a lesser extent, 11% of households do not plan to reduce their investment in their registered education savings plan (RESP).
These numbers clearly reveal that household needs are constantly and that it’s important to have a plan and save in anticipation of future surprises.
Education Costs: Bills That Need to Be Planned For
It’s no secret that the cost of education is constantly increasing and will continue to do so, and it’s not just because telecom tools are now commonly used in classrooms! In the long run, these costs could add up and represent a financial strain for families with little or no savings.
According to the survey, families are worried about the increasing cost of education and how they will put their children through school. Yet, few seem to be taking this into consideration in their savings strategy for their children’s future education. The amount families in Quebec contribute to their RESP is 50% less than that which they estimate will be needed. Specifically, Quebec households estimate their annual education-related expenses at $2,569, twice the average RESP investment of $1,270.
“The survey tells us that Quebec households are concerned with the increasing cost of education. Considering an RESP investment could be in the best interest of many families. This is a low-risk and profitable savings strategy, as RESPs are also eligible for government grants ranging from 30% to 60% of the capital invested based on family income,” explains Sonia Dupèré, Associate Vice-President of Customer Service and Sales Administration at Kaleido, “What more, with Universitas, the refund of savings is guaranteed 100%2 at plan maturity.”
By opening and contributing to an RESP, parents are offering their children a chance to pursue their dreams and to build a bright future for themselves.
Essential Living Expenses Get the Largest Share of the Budget
Despite the many expected technological changes to come, food and housing remain basic essential living expenses and the greater part of the household budget goes toward these. The grocery basket is of course the expense that seems to be the most feared by Quebecers, with more than half of the respondents (52%) believe their grocery bill is likely to increase by an average $139 over the next year. Healthcare expenses came in second place (36%), closely trailed by education costs (33%) – all school levels considered.
Lastly, it’s important to be aware that living expenses are likely to change or evolve, as are our essential needs. To ensure the sound management of household expenses, it’s best to review the family budget yearly. Doing so will allow you to avoid unnecessary spending and set realistic investment objectives (savings).
And so, it’s likely Santa won’t leave an iPhone under the Christmas tree for my daughter this year, but I’m sure he’ll think of something else she really wants... and needs.
What living expenses are necessary to your family?
1.The survey was conducted online from August 12 to 17, 2015 by CROP firm, using a Web panel and a sample of 1,000 Quebecer. Results were weighted to reflect the distribution of Quebec's adult population based on gender, age, region, language, education level, and the socio-cultural values of the respondents. As this is a non-probably survey, the margin of sampling error does not apply.
2. The refund of contributions (ROC) at plan maturity includes the sales charges of $200 per unit under the REFLEX Plan. Under the INDIVIDUAL Plan, the sales charge of up to $200 is not refunded. Certain conditions apply, refer to the Prospectus.