Universities are expected to cut their budgets. There are also calls to stop subsidised tuition fees for higher earning families. Experts predict the change will be aimed at households with annual incomes of more than £25,000, so the middle classes will be hardest hit by any possible changes. With fees likely to rise, and the lack of likely financial support, the rising costs of living, and so on, is it surprising that so many students graduate with debts in excess of £20,000? The debate for many parents is whether or not they should be supporting their children.
When considering university education, as a parent you should be asking:
1. What will it cost to send my child to university for a year? As a rough guide you might consider:
Tuition fees £3,000
Accommodation £5,000
Books, beer and beans on toast £4,000
TOTAL £12,000
2. Can I afford it?
3. Before committing a great deal of hard-earned cash, is your child suited to university and will future employers see the benefit of this huge investment once your child is “released” into the big wide world?
So the question is, how best to provide the right amounts, at the right time in the most tax-efficient, least volatile and secure manner.
Cash provides security, but in today’s low interest rate climate, most deposit accounts offer little potential for growth. You could consider Cash ISAs, where the interest will be payable with no further liability to income tax, but again you need to do your homework to ensure you get a decent rate, and review it regularly.
Investments in equities over the long term might prove to be a more favourable choice. But, that all assumes you have time. Our advice would be to start as early as you can – the longer you have to save the less you need to put aside each month.
Some will favour child trust funds, but I have to say that I am not a fan of giving children control of large sums at a young age. They might prefer the beach in Bali, or might have some awful boy/girlfriend in tow! If the money is in the parent’s name, they retain control. You may agree to fund Bali or the awful boy/girlfriend, but it will be your choice!
