And many are not prepared
Most parents want to help their children through university, however, a large proportion underestimate the overall costs they could face. Many have to find the funds by downsizing their home, cashing in stocks and shares or using their entire cash savings. Planning ahead could reduce the financial burden, and minimise these drastic measures.
How much debt to expect?
The cost of university education in the UK has been rising exponentially in the last few decades. Long gone are bursaries and grants, and the “beans on toast” student lifestyle of generations past. The current generation are faced with rising tuition fees and a different perspective on what it is to be a student.
Recent student debt research by the Association of Investment Companies (AIC) showed that students and parents were drastically off-mark when estimating the cost of university.
Parents, on average, predicted a university education would cost close to £18,000. Students believed their education would cost around £30,000.
However, according to the a report by Institute of Fiscal Studies, in April 2014, actual figures show debt is likely to be closer to £44,000.
Parent’s sacrifices
Research showed that whilst two thirds want to support their children’s university education, financially, it could come at a cost to their own standard of living, or their own retirement plan.
Around 22% of parents suggest they would have to use their entire cash savings to fund university plans, with 61% using some cash savings.
9% of parents said they would sell, or downsize the family home, when the time was relevant and 11% would sell stocks and shares.
Financing university is becoming a reason to drop out
The excessive costs of university is becoming a careful consideration for young adults leaving school and college.
For 30% of students surveyed, it had crossed their mind to drop out of university, with financial reasons being relevant for 37%, the second highest reason over, simply, the wrong choice of course, 47%.
Going to university used to be more than just about studying; it was about the opportunity to leave home, fend for yourself and gain independence. However, many university students are now forced to live at home with parents whilst studying, principally due to lack of funds available to rent.
As an average, 21% of students live at home, or plan to, whilst at university, to save on costs and to avoid getting into too much debt. In London, and for low income families, this figure rises to over 30%.
The tables are turning
Whilst it is still the case that most young adults (49%) would choose university as a reason to have financial help from their parents, the tables are turning. 31% would prefer help to get onto the property ladder, whilst others would opt to travel or own a car.
Financial planning for the whole family
Planning ahead is essential to avoid any drastic measures if and when your children decide to go to university.
A Junior ISA can be a good way to save for your child’s future; even if their future doesn’t end up including university, the funds saved can help with whatever dream they wish to fulfil.
Read more – 5 reasons to save into a Junior ISA
There are other factors to take into account too – perhaps investing in a suitable student home now could be a worth consideration, giving your child independence, at the same time as making an income to support your own retirement plan.
Dental & Medical Financial Services can help with a bespoke financial plan for your whole family, taking into account future university costs. Call today and Darren can help discuss your options.