RESPs for Low-Income Families: Co-Creating Solutions
A Registered Education Savings Plan (RESP) is a tax-sheltered plan that allows families to set money aside for their children’s post-secondary education. Currently, the majority of RESPs are opened by families with middle- or upper-class incomes. Yet investing in post-secondary education is equally important for low-income families as higher education is strongly correlated to prosperity and should be a viable opportunity for all Canadians.
While the federal government offers programs to assist low-income families with saving, these programs have low uptake among the families they were created to serve. As part of the Bridgeable Designership Program, Bridgeable collaborated with Prosper Canada and Peel Children and Youth Initiative to research and design solutions that help low-income families access and take advantage of RESP support programs, specifically the Canada Learning Bond (CLB). In Peel region, which has a higher uptake rate than most of Ontario, only about 40% of children who are eligible for this benefit are actually taking advantage of it.
Several major banks and credit unions offer RESP-specific savings accounts, which make it easy to take advantage of the CLB without requiring any additional investment from parents. Unfortunately, most families are not aware of this option, and not only do banks not advertise this no-fee savings account, many bank employees are not even aware that it exists and have even turned away prospective clients who inquire specifically about the CLB.
The preliminary goals of the project were to:
01 / Better understand and communicate the challenges low-income families face around RESP accounts and government support programs like the Canada Learning Bond
02 / Identify potential community interventions to boost uptake of these programs
03 / Make it easier for staff at financial institutions to help families open RESP accounts and access Government support programs
Through interviews with low-income families and community organizations, we found that before an individual even gets to the bank, there are a number of barriers pertaining to perception that need to be overcome first. For many low-income individuals who have experienced debt, the term “savings account” conjures negative associations, and an assumption that investment is either too risky or unaffordable. If making ends meet on a daily basis is a top priority, and when there’s rarely any money to spare, the dominant preconception is that “savings” are a luxury and simply not possible for someone in their financial position.
Past negative experiences with government programs or financial institutions may mean that individuals distrust that the program can actually offer the stated benefit. Personal relationships are a primary source of information for many low-income individuals (more so than for the general population), meaning that it’s critical their knowledge about RESPs comes from a trusted and informed contact. Another factor is that language can pose a barrier: financial jargon can be confusing and intimidating, and can reinforce the idea that this process is out of their reach.
It was important to note, however, that although the CLB money is “free,” promoters should be sensitive to the fact that there are costs incurred as part of the process. The individual may need to take time off work, arrange for transport, and possibly childcare, plus fees for required identification such as a birth certificate. The key shift in perception is that although the monetary value of the CLB may not outweigh these initial costs, the true benefit of the CLB lies in its significance: the act of saving up for the child’s future education demonstrates that the parent believes in their child’s ability to achieve a better, brighter future. As some of our informants revealed, previous research has shown that children with a savings account are six times more likely to attend post-secondary education.
The experience of signing up for an RESP for individuals classified as ‘low-income’ generally followed one of two patterns, which was related to how long the family had been in poverty. Recognizing this difference was important because the source of their motivation affected how they dealt with barriers they encountered during the sign-up process. On the experience map below, Persona 1, shown in orange, represents individuals from highly educated families who may only be temporarily low-income due to their status as a recent grad or new immigrant. Persona 2, shown in yellow, represents individuals from families that continually move in and out of poverty or where the parents have not typically completed post-secondary education.
The map demonstrates that there are very few tangible rewards or ‘feel good’ moments to keep individuals motivated as they move through this complex process. Individuals similar to Persona 1 tended to have a future-oriented outlook, which drives them to disregard possible deterrents, such as returning for a second appointment, as part of a larger return. Persona 2 individuals tended to prioritise tasks with more immediate payback; encountering one roadblock in the journey can cost more than the CLB’s perceived worth, causing them to abandon the process.
Co-creation and Prototypes
The next step was to conduct a co-creation workshop that brought together a variety of stakeholders including front-line workers at community agencies, financial advisers at banks, and other key informants specializing in policy and financial literacy. Over the course of a day, participants were immersed in research insights and engaged in activities to test out ideas for addressing two main opportunity areas: becoming aware of the CLB, and the sign-up appointment. In either case it was important to relay information in a manner that empathises with the individuals and is clear and easy to understand, especially since the target demographic has limited time and English literacy. Groups also focused on how to celebrate the completion of the sign-up process – an accomplishment currently unacknowledged in spite of the effort required to achieve it.
We narrowed the prototypes down to two web-based tools: one directed at informing low-income users about the details of the CLB, and one for banks to facilitate the sign-up process and conversation. The decision to use a web-based platform was significant, and a step towards ensuring the longevity of the tools beyond the scope of the summer project. Given the challenge of funding these types of initiatives, we presented a solution that can be maintained and shared at minimal cost. Both tools aim to ground the abstract concepts of investment options and savings goals into tangible values that would help to shift the focus from an uncertain and overwhelming task to specific outcomes. One of the goals is to use information to empower the individual: if people felt confident in their knowledge and understanding of how the benefit works, they were much adept at navigating and completing the entire process.
The user-based tool is a resource the individuals could access on their own or that could be introduced to them through a community adviser such as a settlement worker. Responding to the anxiety we heard during research, partly what differentiates the user-support tool from information currently available online is its perspective: the tool walks the user through each step in detail and explores the outcome of several ‘what if’ scenarios so that individuals know what to expect and can prepare accordingly.
The bank-support tool responds to the challenge that bank employees do not open RESPs very frequently. By guiding both the adviser and the applicant through each step in the process, the tool saves time for the bank employee and ensures that the options and benefits available to low-income families are not overlooked. Attractive visuals and a customizable savings calculator offer encouragement through what can be a daunting experience and helps make clear to families why it’s worth it.
Both prototypes were validated with a range of stakeholders, some of whom attended the co-creation session and could participate in the evolution of the tools, as well as low-income families who were responding to the tools for the first time. These participants provided insight into how these tools would affect their roles in the RESP sign-up process and worked with us to revise these resources to fit their needs.