Funding higher education the smart way
AUGUST 25TH, 2009 By DOMINIC
Congratulations to all those who passed their A-levels in the past week and are heading off to the uni of their choice next month. It’s an exciting time for undergraduates as they embark on the next phase of their lives but at the same time it must be marred by the harsh realities of this generation’s student life; heavy debt and a lingering recession.
I read with interest the findings of the Push Student Debt Survey that said students starting university this autumn can expect to graduate owing £23,000. Ouch. It was a gloomy forecast highlighting an average annual debt of £5,000, with the type of degree course and university location influencing this already shocking figure.
In fact my god daughter has just found out she’s been accepted at Worcester to do a teaching degree (well done Katie) and has come to her own conclusion that she’ll stay at home and commute to the university daily. Her parents wouldn’t have denied her the ‘away from home’ experience but are quietly relieved she made this decision (for the sake of theirs and Katie’s future bank balance).
I’ve had a flurry of calls from clients asking about investment surrender and the best way to release funds periodically to help bank roll their kids education over the next few years. This is all fine and can be done but really the best advice is start planning as early as you can.
Take advantage of the Government’s Child Trust Fund initiative (for children born after 1 Sept 2002), the investment version as opposed to the cash saving plan. It’s a no brainer not to utilise it, as it’s a tax free savings plan which doesn’t involve a huge financial outlay. The maximum annual investment is £1,200. Based on an annual premium of £1,200 at a growth rate of 5% (factoring in charges) at the 18th year, if you’d started the year your child was born it would have a cumulative value of £35,446.80. Pretty impressive. So, if you have a young family and haven’t already started, get your direct debits set up and get the ball rolling. For children born before this date look at tax free ISAs and mentally designate it for your child’s higher education.
Ask your financial planner about trust funds, again, start early and you’ll reap the financial benefits later.
Taking the long term view, it’s a good time to invest in shares, particularly while the market is relatively low, it’s already climbing, so start now.
Some of my clients have taken advantage of the falling housing market by buying property in the town or city where
their child is studying. The rental income from house shares can cover the mortgage or go towards your child’s allowance if you’re able to buy outright. You can always keep hold of the property after your child has finished their studies and confidently continue to rent it to the student or young professional market.
Whatever your budget there are quite a few options for helping to support your children through higher education but I can’t stress enough the importance of starting in their early years. It’s not about being a pushy parent, it’s about sensible planning. Even if they don’t go to university it will never be a wasted investment.
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By Charlotte Lloyd-Jones, October 28, 2009 @ 9:51 pm
Being the mother of 2 young children financial planning for higher education is one of those things which you know you need to get round to but there is always something more immediate which is pressing. Thanks to this article I am re-motivated to go and sort this out. Education to me is of the utmost importance and I’m not putting the financial planning of it off any longer!
By Lianne Riley, November 10, 2009 @ 12:51 pm
Thank you for writing such an easy to read informative document. I have to say this was 5 mins well spent reading the article as it gave me the evidence I needed to nag my partner in to sorting child number 2′s trust fund. All done. Will have to find something else to nag about now!
By Dominic, November 24, 2009 @ 3:28 pm
Lianne, it’s great to hear that our blog can really make a useful difference. It’s amazing how many people never get round to organising something simple as this. You and your children will really benefit in the long term.