A Parent’s Guide to Saving and Investing for University
Preparing your child for university can be as foreign a prospect as a trip to a foreign nation.
You know it's coming, and you want to get them ready. It’s not like nursery school where you pack up their lunch, buy a few crayons and colouring books, and you’re good to go. It’s not that simple, but it’s not too hard either. You just need a guide to let you know how to start!
Start Early, Breathe Easier Later
University is extremely costly. With rent, tuition, books and living costs, after a while, it can add up to be a great deal. That is the reason the early bird gets the worm. Even small ongoing savings can mount up to a large amount after 15 or 10 years.
And it’s not just the money, it's also about the peace of mind. Saving early can open up all kinds of opportunities down the road. Maybe you’ll opt for that school that’s just a little bit better than you expected! You’ll be prepared to spend those extra pounds if your living situation doesn’t pan out the way you expected, instead of scrambling to come up with the cash that should have been saved a decade or so earlier.
Choose the Right Saving Tool
There are plenty of tools to select from, but one of the tax-friendly ways to save towards the future education of your child is to invest with a Junior ISA. It's convenient, flexible and accumulates tax-free.
With a Junior ISA:
- Your child won't pay tax on interest or investment gain.
- You can save £9,000 annually (up to 2025).
- It's saved until age 18, so there'll be no mid-teens splurges.
But that’s not all. You are also offered a cash Junior ISA and a stocks and shares Junior ISA.
Set a Target and Work Backwards
How much is university, then? The typical UK student will be paying £9,250 a year in fees and living costs more than twice that.
Here’s a breakdown:
- 3 years' tuition: £27,750
- Living costs (£10,000 per year): £30,000
- Total: Around £57,750
If you wish to save half the amount, you'll need to aim to save around £29,000. Break that down into monthly goals. You have 15 years to save, so that's around £160 a month — or less if your investments are good.
Don’t Rely on Loans Alone
Student loans are a godsend. And yes, your child will probably be able to get one. But borrowing money and paying it back later often comes with a high price. The interest can stack up quickly, and instead of degrees, your child could be buried in debt for years to come. Plus, student loans don’t cover everything. Especially if they’re attending university in one of the world’s most expensive cities, like London, where a hot lunch sets you back £10.
Having their own funds can really help. You’re not spoiling them. Just providing a safety net that allows them to concentrate on their studies without constantly worrying about their account running dry (or getting that part-time job that cuts into study time).
Make Saving a Habit, Not a Chore
Like brushing teeth, make saving up a habit. Set up a direct debit monthly and put it on autopilot. You will hardly even see that the money is being withdrawn from your account, but your child's savings will be building up step by step.
And on birthdays and Christmas? Get relatives to spend money in the Junior ISA instead of pulling out yet more toys!
Involve Your Child
As they grow older, talk to your child about the savings you’ve set aside. Teaching them about money builds good habits and shows them the value of your efforts. You can even get your teenager to help make investment decisions for their ISA. It’s a wonderful way of bonding and learning how to handle money!
