New parents should start saving up to £260 a month to fund university costs
According to new figures from rplan.co.uk new parents should be looking to save up to £260 a month to cover the cost of university fees.
This estimate is based on ‘upper tier’ fees and living costs growth at 2% inflation. This assumes the fees continue to be £9,000 pa and annual living costs are £8,000, giving a total of £74,307 over three years. A ‘lower tier’ estimate, assumes the fees are £6,000 which gives a three-year total of £43,710.
As parents, we naturally want to give our children every opportunity in life, especially if it’s going to lead to a prosperous career and financial stability.
With a record number of teenagers being accepted in to university places in 2016 and tuition fees set to rise, parents should start thinking about saving for their children’s future as soon as possible.
The average easy access ISA interest rate is currently very low and dropping, which means parents would have to save more money each month to reach the £74,307 target by 2034.
If you are starting your savings journey 18 years ahead then an investment portfolio could be considered, as for a slightly higher risk you can get a higher return, meaning lower monthly contributions.
Even with this longer timeframe your children’s education may not be something you want to take a risk with, but generally diversifying the risk over time can allow investors to take advantage of downturns in the market by buying investments at cheaper rates, therefore making your investment work harder.
Take a look at our Lemonade ISA if you think an investment ISA would work for you. There are 10 levels of risk to choose from and we can find the one that suits you best.
The table below shows the suggested figures for saving for university for new parents who have 18 years to save, alongside suggested savings figures for parents who may have less time to save.
Source: University Plan facility on rplan.co.uk, projecting current costs of tuition fees (between £6,000 and £9,000 per year) and living expenses (between £4,000 and £8,000 per year) adjusted for inflation at 2% pa.
Please note: The value of investments may go down as well as up and you may not get back as much as you originally invested.