Over the coming months, we’ll be sharing a special series of Milestones articles with you. These cover financial planning for different life stages. Here’s the first article, covering higher education.
If you have a child, or children, who may want to go on to study beyond school, things could get expensive. Very expensive.
University tuition fees in England are now the highest in the world with the average annual cost being £9,188. Add to that the cost of living (rent, food, bills) which is estimated at between £695 and £1,370 per month, depending on location and lifestyle, and your child is going to have to find a lot of money from somewhere.
Whilst student loans may be available (depending on circumstances) to cover a chunk of that, they will still need to cover some costs themselves. And with graduates now shouldering the burden of an average debt totalling £50k by the time they leave university, you might be keen to figure out how you can help them avoid this rather soul-destroying scenario.
The golden rule: start as soon as possible
The longer you have to save, the easier it will be to save up the sums necessary to ensure your child doesn’t end up graduating from university with monster debts.
Don’t feel like you have to do it all
Saving £50k in a lifetime is a challenge for most people. Then handing it all over to a (potentially reckless?) 18-year-old for their education can seem like a hugely daunting task.
Bearing in mind the loans available, don’t feel like you have to cover it all. Even putting away a little each month towards your child’s education can help relieve the strain, for you and for them. As with many momentous tasks, breaking it down into smaller chunks will make it feel more manageable.
Saving for your children
We’ve written before about how to save for your children.
The simplest step to take is to set up a Junior ISA (or a Child Trust Fund if your child was born between 1 September 2002 and 2 January 2011). This money is locked away until your child is 18, perfect timing for starting university.
Remember: at 18, your child is free to spend that money on whatever they want. So whilst you might be thinking education, they may have other ideas!
Your own savings
Most people have limited spare money to go around. It can be tempting to put things like your own pension contributions on hold to focus on saving for your kids. But with a bit of planning, you can do both.
Create a budget. See if there are any areas of spending that you can trim to redirect funds into an account to save for your child’s education, whilst maintaining (or starting) your own pension contributions. Some of the money you’re saving for your children can go directly into the savings accounts you’ve set up for them. Some you can save into your own accounts.
If you have time on your side (five years or more) and a reasonable appetite for risk, you may want to consider investing into a stocks and shares ISA, rather than the cash equivalent. Markets are currently volatile, but historical evidence still suggests that, over the long-term, stocks and shares tend to outperform deposit accounts.
If you have less time to save, avoid taking risks with your money. It’s best to keep your savings in a deposit account – an ISA is a sensible choice. Once you’ve used your ISA allowance, fixed-rate bonds offer the highest rates of interest, with the best returns available, if you’re willing and able to tie up your savings for five years.
Educate your children
As with saving, the earlier you start educating your children about money, the better. Encourage them to put some of their birthday money into their savings account and teach them the value of having that pot of money accruing interest.
Becoming financially responsible is an essential step towards adulthood. But with university perhaps being first time they have been responsible for their own finances, make sure you reiterate the importance of budgeting before they’re released into the wilds of student life. Give them some tips on making ends meet on a limited budget, teach them how to make some budget-friendly meals. They will thank you for it in the long run!
Encourage them to get a part time job
It’s a great idea to do this before your child starts uni to get some funds, and life experience. But it can also be a great way to supplement their money as they study – as long as they don’t feel overburdened or take their eye off the reason they’re really at university in the first place.
Research bursaries, scholarships and grants
There are some limited options still available and they may be worth investigating. With university funding always a hot topic in parliament, who knows what the landscape will be like in a few years’ time. Careful planning will leave you, and your children, better prepared for any future scenarios.
Remember: higher education isn’t the only option
Opportunities for young people are changing all the time. It may be that, when the time comes, university isn’t the right option for your children. An apprenticeship or some other kind of on-the-job training may better suit their ambitions.
If that happens, you can reallocate the funds you’ve saved for education to another area – their first house, perhaps. Either way, it certainly won’t be a wasted effort!
For further advice on how to get the most from your money, please get in touch.