The Canada Learning Bond: A saving success story

26 September 2016
When micro-financiers first began extending small loans to low-income households decades ago their approach challenged conventional notions of business and charity and was dismissed as high-risk and unsustainable. The skeptics were wrong. Around the world, micro-lending proved that low-income clients are not only responsible money managers they’re also an excellent investment. 
 
As micro-finance institutions soon came to learn, however, for every one client seeking a loan there were ten looking to start a savings account. Households with low or unstable income know that savings improve financial stability in ways that debt cannot. Savings defend against the unforeseen, reduce dependence on others and enable planning for the future. In Canada low-income savers still face old doubts. “Can low-income households save?” it’s questioned, “and if they can, are they actually poor?”
 
In a society that encourages spending, saving can be a hard, slow process. For those struggling to make ends meet, it’s also sometimes actively discouraged. Yet the evidence is as clear here as it is abroad. Even those with the least can and want to save. The impact of the Canada Learning Bond is a prime example.  
 
Few goals motivate a family to save more than their children's educational success. The Government of Canada recognized the aspirations of lower-income savers with the introduction of the Canada Learning Bond (CLB) in 2004 as an addition to the Registered Education Savings Plan (RESP). The CLB provides lower-income families with up to $2,000 with no family contribution required to start an RESP. For those able to contribute, the Canada Education Savings Grant offers a match of up to 40 per cent. Results to date have been remarkable. Though not required, families have contributed to 97 per cent of their CLB accounts. Already, the Government's investment in the CLB has motivated five times as much in family savings and the oldest of the 700,000 children who’ve received the CLB so far, are still only in elementary school.
 
The Canada Learning Bond is an inspiring example of how encouraging lower-income families to save can ignite a chain reaction of successes. Starting an RESP motivates a family to save. A family's growing investment in an education fund builds a child's confidence to continue their education, and higher education improves their future financial prospects. As research from Canada and the US confirms, there is a clear link between education savings and better education outcomes.  
 
But to date, only a third of the 2.5 million Canadian children eligible for the CLB have received it, mostly because their parents don’t know about it or how to get it. Working with community and financial institution partners, our SmartSAVER program is making more lower-income families aware of the CLB and helping them to open RESPs at no cost. Our online application is available 24/7 and is supported in English, French, Mandarin, Punjabi and Spanish. 
 
You can help more families to become successful savers by making them aware of the Canada Learning Bond. Get started by visiting SmartSAVER.org.
 
May Wong
Executive Director
Omega Foundation