The cost of your child's education.

Seeing our children going to university is a bitter-sweet moment, we are glad to see them growing up and setting out into the world on their own, but we are nervous about their future wellbeing, and more than anything, that they can afford to live.

Once you have left them behind at their Fresher’s Fair, you have to accept there is little you can do about the first of your concerns, but with good planning, you should be able to help with the latter.

Getting a university education does not come cheap, no matter where your children plan to study. For example, undergraduates in Australia can expect to pay between A$14,000 and A$35,500 a year in both tuition fees and living expenses, according to Graduateshotline.com.

In the USA, Infozee.com highlights that university tuition fees alone range from US$10,000 a year at a low-cost, State-supported university, to as much as US$25,000 a year or more at a high cost private university. In some cases, the fees can be double this depending on where you are studying.

Education has got a lot more expensive in the UK too this year, thanks to new legislation that now allow universities to charge as much as £9,000 a year in tuition fees.
The result is that The Push university guide says that UK graduates are expecting to leave university with around £53,000 of debt now, with average tuition fees rising to £8,600 for 2012.

Even though your child must be earning more than £21,000 before the student loan would have to start being paid back, having it hanging over their child will not sit well with many parents.

Student grants, which many of us would have benefited from when we went to university, are now a thing of the past unless your household income is below £42,600 a year. For those who do not qualify, maintenance fees would need to be borrowed alongside tuition fees, and if your child is living and studying in London, they can borrow up to £7,675 a year for their course.

On a three-year degree in London, this could leave your child owing a wallet-busting £50,025 just to the Student Loan Company. Even knowing that this does not have to be repaid before they earn £21,000 a year, the debt will still be hanging over them for the next 30 years, which is a very unappealing prospect.

But that is only for a basic degree if you want to study longer and get more than a BA or a BSc, you are looking at even higher fees. Many students will continue studying to differentiate themselves from the crowd by getting additional qualifications, such as an MA, MSc, MBA or even a PhD.

So, if you are a parent who is able to save, putting the money aside to help your child keep any debts to a minimum will be one of the best gifts you can give them. The important thing to remember is that to create a fund that will help sufficiently, you need to start planning early, and make regular payments.

As with so many long-term savings goals, the sooner you start to save, the easier it is to reach the target you have. If you start as soon as your child is born, you will have at least 18 years to build up a fund that will meet their needs when they reach adulthood. Remember too, even if you start the fund for university fees when they are born, you may find they use it to help buy their first home, or to fund a first car. No matter what the ultimate use of that money, it will provide them with a stable start.

Let’s assume you are going to continue putting money away for fees even while your child is at university – that gives you 22 years to save if they are doing a four-year course if your child was born today.

If you include the cost of living, a four-year course could easily cost between £100,000 and £110,000. With a growth rate assumed at 7% a year on average for the payments you are making into your child’s education fund, you would need to save £190 a month to meet these costs effectively.

If your child has already reached five years of age, meaning you only have 17 years left to save, then you have already raised that monthly figure to £290 a month to meet the fees. Delay any longer, and if your child reaches 10 before you start putting money away for their education, you are looking at having to find a £500 a month to keep your child out of debt before they graduate. The cost of delay is significant, and could make the difference between you being able to cover the costs of your child’s education right the way through, and not offering them all the help they need.

Having debts to pay off when they graduate, especially if your child is taking out loans or debts on credit cards to get by, will mean they could be delayed in getting on the property ladder, or even trying to build up a deposit, let alone getting a mortgage.

So putting something aside to help cover these costs is one of the best ways you can help your child start their adult life. But do not think that you have to do all of this alone - remember, the money going into the fund does not only have to come from you. Gifts from friends and family and regular gifts from, perhaps, grandparents will all help to boost the total amount being added. It could even be a way of them helping to reduce their inheritance tax liabilities.

As with any portfolio, you need to choose which funds to invest in carefully to get the best returns you can. But you must do this at a level of risk you are happy with. This is where getting a good financial adviser can make all the difference.

Helping you to make the right decisions at the right time is a key part of the service you should expect from your adviser, and you need to be confident you can trust the information you are receiving is independent advice. This is something that can be hard to come by as an expat.

Just like your child, a portfolio that is building to pay for his or her university fees – or whatever it is eventually used for – needs nurturing. It needs to be monitored closely, at least every six to 12 months, and when it starts to go off the rails, you need to work with your adviser to get it back on track.

It does not matter if you only have a small amount to put away for your child each month, a regular investment plan will help to work wonders to not only give you the peace of mind that you are doing everything you can to help your child on his or her way, but that they will get the best possible start to their adult life.

That, as you will find out when you get to that moment in time, is priceless.

If you would like to book an appointment to review your financial planning please call Paul Dodd Senior Financial Consultant, 089 330082 or why not email pdodd [at] infinityfinancialsolutions [dot] com

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