Making sure your child has all the opportunity to succeed in life is every parent’s goal and for many, this includes providing the chance to attend university. Unfortunately, university doesn’t come cheap. Exactly how much and when will you need to start saving for this endeavour?
This does not constitute advice and advice should be sought in all instances before acting on it.
University has been cited as the most expensive cost associated with raising a child, and for good reason. On top of tuition, you’ll need to consider room and board, books, supplies, and possibly even new technology to help them get the best education they can get.
The early bird gets the worm
You might be surprised at how early you really should start saving. If you don’t want to leave anything to chance or have a hefty loan at the end of their studies, the best time to start a university fund is the day your child is born! In fact, parents who start saving immediately will be able to save about £7,500 more than individuals who delay saving until their child reaches 16.
If you start by investing just £165 a month into an investment bond with a rate of 5%, you could have £41,580 before interest by the time your child is 21. This will offset costs considerably since according to IFS, students can graduate with over £50,000 worth of debt and anything that can be done to avoid that is a good move.
Late, but not too late
It’s a slightly different story if you put off saving for the future for a few years. If you wait until your child is 4 or 5 (at the start of primary school) you will need to set aside £213 or £229, respectively. By missing 4 or 5 valuable years of saving there’s a larger gap to cover by the time graduation rolls around. Investing when your child is 4 leaves £1,872 to make up while starting at 5 leaves you to find £2,388.
Delayed investment
Investing for university when your child begins primary school does leave a gap, but the additional savings compared to investing from birth is not too obtrusive. However, if you wait until your child begins secondary school, the monthly investment goes up considerably. Your monthly contribution will need to increase to £390 a month if you wait until they’re age 11 and the cost of the delay jumps up to £5,220.
The individuals in perhaps the worst shape of all savers are those that wait until their child is 16 before they start thinking about money for university. These parents will need to allocate £820 a month to education savings and will have a whopping £7,620 gap to make up.
This is not to say there’s a bad time to start investing in your child’s future — there’s just a “best” time. The earlier the better according to all calculations. Don’t fall into the trap of “there will always be time” because that could lead to thousands of pounds of savings wasted. After all, it’s a lot more manageable to squirrel away £165 than £820 a month, no matter how much you are earning.
We’re here to help
We’re here to help you meet all your professional and personal financial goals and we’d love to help the next generation succeed. So if you need guidance mapping out a savings plan for your child’s education, give us a call.
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