Financial Planning For University

The rising cost of university education in the UK shows no signs of easing. As intimidating as the current costs of this university education is, the projected trends paint an even tougher financial picture for future generations.

If you are married and have children or if you intend to wed and have children, the time to start planning for their university years is now. If you are late getting to the game, it is not too late to implement a university savings plan. These can lead to some compromises in your current lifestyle but without careful planning and preparation, there is unlikely to be a magical solution.

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Painting The Picture

For brand new parents, you have about 18 years to meet or help your child meet their first university tuition expense. When you are young parents, saving for university can be especially challenging. There are so many other financial responsibilities built into our savings plan that something 18-years removed can seem too far off to be concerned with. However, if you ask people who have been through it, it is never too early to start planning and saving for university.

Upon graduation, today’s university graduates are burdened with historically high debt. As we all know, to begin a career with debt hanging over one’s head can really affect the way we live, our career choices and family plans. In 2011, the average debt burdening the newest university graduates was £24,000.

Even more alarming is that the cost of tuition seems to increase every year. The UK’s most in-demand colleges will soon reach and pass the £10,000 per year milestone. Many experts suggest that a university savings pot of about £60,000 will probably cover most of the university debt. No matter how we regard the value of education, it costs a lot of money; an almost an inconceivable amount for those of us who graduated even five years ago.

Breaking Your Savings Down

There are many ways to begin saving for university. Obviously, if you save about £170 per month over 18 years, and earned an average savings rate of 5 percent per year, you would have a tidy educational fund of about £60,000.

Of course, there are times that saving £170 per month can be really difficult, almost impossible. By comparison, saving £25 per month at 5 percent will generate a savings of £8,700 in 18 years. Saving £40 per month over 18 years at 5 percent will create a tidy savings of £14,000.

Obviously, a more aggressive savings program could potentially be helpful for your children’s university education. Remember, £60,000 per student is only an estimate by industry leaders. The actual figure could go either way.

Education Savings Products

Fund management companies offer different Children Investment Programs that can serve a multitude of purposes with education being the primary goal. There are multiple savings plans out there on the market at highly competitive rates.

Of course, one of the major considerations with children’s savings is the tax liability. Children and adults share the same personal tax allowance. As long as the children’s savings account does not pay more than the limit annually, the interest is tax free. This amounts to a built-in savings of about 20 percent.

Children’s savings plans require completion and filing of Form R85 for each account. If the investment strategy realises capital gains and they do not exceed the capital gains tax allowance, there is no CGT liability. It is important for the parent to understand all personal tax liabilities related to the fund.

The Education Savings Strategy

If you are like most parents, you will often wonder about your child’s future, and think about how your child will be able to attend university. You would prefer that they graduate with as little debt as possible. As desirable as these possibilities seems, they are fast becoming a challenging task for many Britons.

Savings for education must be part of a long-term saving and investment strategy, considered within a wider context. Certain amounts of the savings and investments portfolio must bear different degrees of risk. Other elements of the portfolio should be risk-free. The way to save most effectively is with a diverse portfolio of investments.

Expert Wealth Management can develop a personalised and comprehensive savings strategy based on many aspects, including income, expenses and future needs. If you would like to plan carefully for guiding your children through university, we can provide the right options for you.

For more information about our services, call 01993 772467. You can also contact us online.