Workers with higher levels of education also have higher savings and wealth accumulation, even after controlling for income and other characteristics that indirectly affect savings behaviour, according to a new study from Statistics Canada (StatsCan) published on Monday
“The study addresses a long-standing information gap around the direct impacts of education on savings and wealth outcomes, and provides new insights on the long-run returns to education,” the StatsCan study says.
For example, the study finds that completing high school increases estimated savings rates in tax-preferred retirement accounts (such as RRSPs) by between two and six percentage points annually, on average.
The study also finds that workers who are better educated tend to have a better understanding of financial concepts, such as how inflation affects the future value of savings, and the relative risks of different savings options.
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In addition, StatsCan reports that the study found that education impacts how workers respond to automatic contributions to registered pension plans (RPPs). Overall, a $1 automatic RPP contribution is estimated to reduce RRSP contributions by 53¢, it says.
However, this varies widely based on education. For example, workers who didn’t complete high school don’t adjust their RRSP savings at all whereas university-educated workers reduce their RRSP contributions by an average of 69¢ per $1 contributed to their workplace pensions.
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