Image by A. Warren, Kansas City, US
Almost half of all UK teenagers attend University, and if you are a parent hoping to send your child to further education, you should start considering the financial impact as soon as possible.
Some Universities fees are now up to £9,000 a year. According to a 2012 study by LV, the average student will also spend £9,250 on other living costs each year, including £4,159 on accommodation, £1,440 on food. This puts the total cost of a three year University education at almost £60,000.
The best advice is to start saving money as early as possible. Start watching your budget carefully and see how much you can put away over how long a period of time. The best way to do this depends on how long you have until your kids go to University.
Less than Five Years
If your child or children are in secondary school, you can save this money in a tax-free ISA. Anything that you can put away now will ease the burden in future.
Alternative, you can use the money you would be putting into savings to pay of debts. This may seem counter-intuitive, but paying off your mortgage or home loan faster will mean less interest to pay in future, and you can "drawdown money to help subsidise the fees later, or re-mortgage if you need to.
Five Ten Years
Depending on your age, you can similarly pay the money into your pension, which is tax-free savings. If you are over 55 or will be by the time your child is in University, you can withdraw 25% of your pension savings at any time.
If you have a little bit longer to save up, ten years or so, and you have money to save, you can look at share-based investments through the ISA scheme. Shares shift in value, so this form of savings is riskier, but could potentially be more rewarding, these savings will also be untaxed, and closer to the time the money is required, you can sell your shares and return the money to a stable cash ISA or savings account. You can also speak to your bank or building society about investing in savings bonds.
Ten or More Years
If you have a child less than seven years old, you can start saving with a Child Trust Fund. Parents have the option to open either a cash or share-based tax-free fund for their child and can contribute up to £3600 per year. You will receive a contribution from the Government on opening the account worth either £250 or £50 in the form of a Child Trust Fund voucher, and another on the child's seventh birthday. All funds and interest will mature and be available to your child on their 18th birthday.
If you plan to pay University fees in full for your children, then be aware it requires a lot of budgeting, and you can either work towards the £60,000 goal now, or have debt follow your children into their adult lives.
Don't forget to teach your child about the value of money and the importance of budgeting, that way they won't be wasting all of your hard-earned cash. Get them signed up for Money Dashboard financial management software as soon as they have a bank account so they can see the impact of their spending and earnings.