Whether it’s tuition fees or living costs, going to university isn’t cheap. So, if your child is planning on getting a degree, it could be helpful to plan ahead and start putting money aside as soon as you can.
Here’s a short guide to help you prepare for your child’s future in the best possible way.
How much does it cost to go to university?
Going to university can cost a lot. Typically, a full-time student could expect to pay tuition fees of up to £9,250 per year depending where in the UK they choose to study. That adds up to £27,750 for a 3-year Bachelor’s degree, and £37,000 for a 4-year Master’s degree.1
However, one thing to bear in mind is that university is currently free for Scots studying in Scotland, and Northern Irish residents staying in Northern Ireland pay up to up to £4,395 a year. Fees are also slightly cheaper (up to £9,000 per year) for students studying in Wales.
But don’t worry, students don’t need to pay their tuition fees upfront. Instead, they can get a tuition fee loan that pays the fees on their behalf. Of course, your child will need to pay back this loan, but not before they finish or leave their course and start earning an income that’s above the repayment threshold.2
How much you can earn before you start paying it back will depend on when you went to university.
Plus, depending on your income, your child could also be eligible for grants to help cover the cost of their tuition.
Needless to say, the greater your child’s tuition fees are, the longer they’ll be in debt for. So, you might want to try and help them as much as you can to relieve the future financial burden.
What other costs could you expect?
In addition to paying tuition fees, your child will (and probably for the first time in their life) need to consider living costs. This will need to include accommodation, bills, transport, groceries and leisure, as well as any books they need for their course.
According to Save the Student, living costs for the average student in 2022 came to £924 per month, which is over £11,000 a year!3
Again, your child isn’t expected to just pay for everything out of their own pocket – they can apply for a maintenance loan that will help cover their expenses. But the amount your child will be eligible for will depend on your household income and where they’ll be living whilst studying.
To give you an idea of how much help they might get for the 2023/2024 academic year:
- Students who live at home (with their parents) could get up to £8,400
- Students who live away from their parents (outside of London) could get up to £9,978
Students who live away from their parents (in London) could get up to £13,0224
There’s no denying it, these loans are great to help students afford the cost of living at university. But it’s important to remember that they are loans – meaning they’ll need to be paid back once your child starts working and earning enough. And with tuition fees, student debt could quickly pile up.
Say, your child plans on completing a 3-year degree, and needs to pay the full tuition fee in England – that's £9,250 a year. Then, let’s imagine that they’re studying outside of London and are entitled to the full maintenance loan of £9,978 a year. Before they even start working, they could owe £57,690!
With that in mind, it could be worth keeping your child’s student debt to a minimum so they can enter the workplace without worrying about this debt and the impact it might have on their take-home pay.
So, how can you help your child with university fees and living costs?
f you want to help your child with university fees and living costs, it could be a good idea to open a Junior ISA where you can put money away for their future. Currently, you can invest up to £9,000 per year without your little one having to pay tax on the returns their money makes. This is your child’s annual ISA allowance.
There are two types of Junior ISAs available, and you could choose one or open one of both types and split this allowance between them if you wanted to.
The first type is a Junior Cash ISA which allows your child to accrue interest on any savings you tuck away for them. The second is a Junior Stocks and Shares ISAs where the money is invested in assets like stocks and bonds to give it an opportunity to grow.
With a Junior Cash ISA, one thing to keep in mind is that every time the interest rate falls below the rate of inflation, the value of their savings will effectively fall. This means that their money won’t be growing as fast as everything else – including their future living costs.
Although with investing there is always a risk that you could end up with less money than you put in, a Junior Stocks and Shares ISA, the money could grow further over the years their gains won't be tied to fixed interest rates (which can be low).
Plus, Junior ISAs are typically a long-term investment because the money you pay into them can only be accessed by your child when they turn 18. And data indicates that the longer you stay invested, the more likely you are to make a gain.
As an example, those who stayed invested in the FTSE 100 for any 10-year period between 1984 and 2021 had an 89% chance of making a positive return.5 So, if your child is still little, then investing in a Junior ISA could help their money blossom.
For instance, if you open a Junior Stocks and Shares ISA as soon as your child is born, put in an initial investment of £200, then pay in £200 a month thereafter, they could celebrate their 18th birthday with a savings pot worth 61,635, which should help with their university fees and living costs.6
How to open a Junior Stocks and Shares ISA
If you’re thinking about opening a Junior Stocks and Shares ISA, using a digital investment platform, like Wealthify, could make it very simple.
All you need to do is give us some details about your child, choose how much you’d like to invest and how often (you can start with just £1!), and select the risk level that suits you and your child. This will impact what your little one's money is invested in.
We’ll do the rest, from picking your investments to managing your child’s ISA on an ongoing basis. But it doesn’t stop there! You’ll also be able to check how your child’s Plan is performing anywhere, at any time, and you'll be able to invite friends and family members to contribute too.
5: Data from Bloomberg
6: This is the projected value for a Confident Plan (Medium Risk Plan) with an Original theme. This is only a forecast and is not a reliable indicator of future performance. If markets perform worse, your return could be £47,189. If markets perform better, your return could be £81,432. Values correct as of 03/07/23.
Figures in this blog are only forecasts and are not reliable indicator of future performance.
The tax treatment depends on your individual circumstances and may be subject to change in the future.
Please remember the value of your investments can go down as well as up, and you could get back less than invested.
Wealthify does not provide financial advice. Seek financial advice if you are unsure about investing.