So long, Palm Springs

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New poll shows students investing in RRSPs the lowest in nearly a decade. Michael Chu reports

Retirement isn’t something students gab about in the OSAP line.

“I can’t save money for the long-term,” said Jennifer Clark, a third-year business student. She said the money she used all of the money from her summer job to cover her living expenses for the school year.

Clark isn’t the only one not dreaming about lawn bowling and early-bird specials. A recent poll by the Royal Bank of Canada found only 39 per cent of Canadians aged 18-34 invested in RRSPs in 2009, down by 61% since 2006.

The declining number is not shocking, considering the escalating levels of debt students carry once they finish school. Finance professors say students don’t make enough money to make RRSPs worthwhile.

The federal government introduced RRSPs, or Registered Retirement Savings Plans, in 1957 to help Canadians set aside money that gains interest without being taxed.

According to the Toronto Star’s Moneyville retirement calculator, a 25-year-old who deposits $5,000 each year could have $820,340 by the time they reach 65.

But Yuanshun Li, a finance professor at Ryerson University, said most students don’t earn enough money to benefit from these investments.

“When I was a student, I didn’t have any extra money to spend at all,” Li said.

“Unless a student pays a high amount of taxes, these types of accounts will not help them.”

He said if students have some extra cash, it would be better to invest in a tax-free savings account.

They work like a normal savings account, but with a few stipulations. Investors can only deposit less than $5,000 per year, and unlike RRSPs, the difference can be carried into future years.

Kathryn Stewart, a second-year criminal justice student, saved enough money to set aside in a tax-free savings account.

“I haven’t set a plan in motion, but I look to the future at least five years,” Stewart said.

“Once I’ve graduated, I will be able to start thinking about long-term investments.”


  1. Great article! TFSAs are much better for students than RRSPs…

    Key consideration for TFSA: If you save $5000 in the TFSA, and then realize you need that for a family emergency or an all-inclusive vacation, you can withdraw – and reinvest it the next year. No penalty.

    If you withdraw money from the RRSP, you’ve lost that contribution room forever. You’ll never earn the interest on it, and over a 30 year career, that is a huge loss.

    For students, its best to let the RRSP contribution room carry forward until you have well paying jobs and some financial security.

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