Free Guide: Paying for University - How to Save for your Child's Future?


WITH this year's exam season underway, many parents will be contemplating the daunting prospect of sending their child to university, whether in the immediate short term or in the future.

Saving for University Guide

With this ambition comes the realisation that their child will be facing tuition fees of up to £9,000 per year (if they were to start this year). Moreover, once you consider living costs, rent, travel and books, parents (and students) are left facing a bill of around £40,000 - £55,000 per child for a 3 year course.

All of these costs may have significant repercussions on an individual's current savings strategies and may provide a different perspective on future saving altogether.

In this short guide, Mitchell Charlesworth's Wealth Management and Tax experts outline potential strategies for ensuring that your saving is as efficient as possible and provide you with 10 savings  ideas that you may wish to consider, should your child be going to university in the immediate, near or distant future.

Click here or on the adjacent image to download a free copy of this guide.

This guide is also useful for grandparents who may be thinking about saving for their grandchildren's future education and would like advice with regards to the most efficient ways to maximise their savings.

If you would like to discuss any of the material discussed in this guide, please contact Neil Martin, Head of Financial Planning, on tel: 0151 255 2300 or email: neil.martin@mitchellcharlesworth.co.uk or Tim Adcock, Tax Partner on tel: 01244 323 051 or email tim.adcock@mitchellcharlesworth.co.uk.

-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------

1. University Fund Saving is Not Different:

It is important to remember that the fundamental strategies behind saving for your child's university bills are no different to saving for something such as a house or retirement fund. However, people often get caught up in the notion that saving for university bills is somehow unlike other saving and has a 'mystique' surrounding it.

If you approach saving for university in the same way as saving for another objective, then the proposition can appear more manageable and in some way, less daunting.

2. Forward Planning:  Start Early = 'Little and Often':

The key, as with most savings strategies, is to start as soon as possible. If you have children, even if they are young, then putting some money aside, little and often, is a sensible idea. Remember, the earlier you start, the greater the potential returns.

3. Be realistic with your savings targets:

With the cost of a 3 year degree course nearing £45,000, it is unlikely that you will be able to negate the entire cost of university bills, particularly if you have more than one child. If you do not aim to cover the entire cost, you can still cover a sizeable chunk of your child's debt which will still help them significantly when the time arrives.

4. Younger children? - Consider taking a greater risk with equities:

Should you have younger children, you may want to consider putting your money into equities. The potential returns on equities can be much larger than other savings tools in the long term. However, this must be weighed up against the higher risk associated with this strategy.

5. Older Children? - Consider less volatile/risky strategies:

If your children have only a few years until university, you may want to consider less risky saving strategies such as cash or bonds. If you have money in equities, as your child grows nearer to university age, you may wish to move your money to more secure, fixed interest savings accounts.

6. Consider Tax-Efficient Strategies:

Individual Savings Accounts (ISAs) are a good tax-efficient way of saving. Money put into ISAs is not subjected to income tax or capital gains tax when it is being held or upon withdrawal. In 2013/14 the overall annual investment limit will be £11,520, which may comprise of; cash up to a maximum of £5,760 and/or balance in stocks and shares of up to £11,520 maximum.

Another option to consider is a Junior ISA. Junior ISAs are long-term tax-free savings accounts for children. Your child can have a Junior ISA if they; are under 18, live in the UK and do not already have a Child Trust Fund account. Each child can have one cash and one 'stocks and shares' Junior ISA at any one time and anybody can put money into a Junior ISA. The total limit for payments into Junior ISAs is currently £3,720 in each tax year. There will be no tax to pay on any interest or gains.

You should note that the money in a Junior ISA belongs to the child and they cannot take the money out until they are 18. However, once they are 18, they could spend the money however they wish, even if it has been put away for university bills.

Whilst Child Trust Funds (CTFs) have now been abolished (replaced by Junior ISAs), if your child already had a CTF, you are still able to pay a small amount into this each year.

7. Consider Alternative Options - Perhaps a house deposit?

You may decide that covering your child's university bills is not a top priority for you.
For example, you may choose to save as much as possible to put some money towards your child's first house deposit and take advantage of student loans when your child reaches university age, to cover the associated bills.

Firstly, this option will mean that your child has a smaller mortgage to pay back, secondly, your child is able to get onto the housing ladder, as they can pay the deposit required and thirdly, the interest rate on a standard variable mortgage is often around 2-3 times the interest rate on a student loan, saving more money in the long run. It is also likely that your child will not want to buy a house until after university, which also gives you more time to save.

8. Ask your family and friends for help:

Another option might be to ask your family and friends to help you save for your child's education. One option may be to set up a savings account and ask grandparents, godparents and other friends to put money into this account rather than buying birthday/Christmas presents. Grandparents might also be able to take advantage of tax-free gifting allowances to help towards your child's fees. This has the added bonus of reducing the Grandparents' potential inheritance tax liability.

9. What if my child will be starting University in the next few years?

Should your child be starting University in the near future, then moving your savings to a less risky strategy is a good idea. In the current economic climate, cash, bonds and fixed term interest rate savings accounts may be a sensible strategy.

It is also worth noting that many universities offer bursaries depending on individual circumstances for those children who cannot afford to pay the full fees and these could be investigated if required.

There are also different student loan facilities available with relatively low interest rates for those who cannot cover all university bills. You may decide to take out these loans and then pay them back over time after graduation.

10. Get more advice from a Savings Expert:

Should you want further advice on any of the points raised in this short guide, please do not hesitate to contact Neil Martin, Mitchell Charlesworth's Head of Financial Planning on tel: 0151 255 2300 or email: neil.martin@mitchellcharlesworth.co.uk and find out how we can help you to try and achieve your savings objectives.

If you would like advice with regards to Tax Planning, Inheritance Tax or Trusts, then contact Tim Adcock on tel: 0151 255 2300 or email: tim.adcock@mitchellcharlesworth.co.uk and discover how we can help.

DISCLAIMER: The material contained in this short guide provides general information about various aspects of financial services and provides ideas and indicators about possible areas of need. It does not attempt to give you advice on any particular product or investment, or to recommend any particular product or investment to you. The information does not constitute professional advice. You should consult a professional adviser if you need financial advice about your personal circumstances. We hope the information provided is helpful but it does not, on its own, add up to proper advice and we cannot take responsibility for anything you do in reliance on it without further discussion with us. It provides a general guide only and is no substitute for you thinking about your own particular circumstances. Do not make a decision based upon the information contained within this guide alone. It is not detailed or comprehensive enough to enable you to make a correctly informed decision. If you would like to discuss a particular issue or generally find out how we can advise on your particular situation then please contact us. If you have any concerns as to whether a particular product or investment is suitable for you, then please contact us for advice. All initial consultations are free of charge and without obligation.

Post a comment

Registered to carry on audit work in the UK and Ireland by the Institute of Chartered Accountants in England and Wales and authorised and regulated by the Financial Conduct Authority for investment business