It is that time of year again when three and four-year-olds start off on their journey through education that could last up to the next 20 years of their lives. Unfortunately, education has to be paid for by someone and as many parents of school leavers will be finding out, university education can be particularly expensive.
For Northern Irish students, tuition fees alone range from just under £4,000 a year at Queens University, to £9,000 a year at English, Scottish and Welsh universities. Cost will undoubtedly be a factor in deciding where future generations will attend university.
A recent study by Nat West concluded that Belfast was the most affordable city in UK for students; Glasgow and Newcastle universities came out as costing more than £5,500 per year more than Queen’s.
While loans are available to cover most of the cost, not all parents want their children to leave university with £50,000 of debt. So what is the alternative? Many students are working part-time to make ends meet and many parents part-fund the cost of their children’s education.
The sooner parents start to save for third-level education, the easier it will be to meet the cost. For example, by saving the child benefit from birth to age 18, a fund of £37,447 would be achieved, assuming 5% growth and 2.5% inflationary increase in child benefit. Interestingly, if parents delayed saving by 4 years until their child starts primary school, then the savings pot would only be worth £25,067 after 14 years – a reduction of £12,380 as a result of a 4 year delay.
It is also worth noting that if the savings only earned 1% interest over this time, then the pot would only be worth £26,226 after 18 years.It is for this reason that share-based savings policies are most commonly used for parents or grandparents setting aside funds for their children’s or grandchildren’s education. Share-based ISAs are ideal savings vehicles, as the payments in can be altered when necessary and payments out can usually be made without penalty at any time and over a period of years.
Statistically, over the long term, shares are likely to significantly outperform bank and building society cash accounts.
David Hill is a Chartered Financial Planner and Independent Financial Adviser at Hills Financial Planning, 15 Agnew Street, Larne. He can be contacted on 028 28276814, email firstname.lastname@example.org or see www.hillsfinancialplanning.co.uk