The rising cost of education

Parents inevitably want to provide their children with the best education, right the way from nursery and Primary school through to University. We all know that education can prove to be costly but how many parents out there can safely say that their child’s future is secure in that respect?

The cost of education is rising all of the time and when we consider how long the average child will spend studying these costs start multiplying. 

One of the aspects of financial planning that is often overlooked is that of education planning.  Neglecting this area can result in putting the parents under massive strain and can even effect their savings and retirement funds.

Each year the National Union of Students estimates how much a full-time, higher education undergraduate in England spends in a standard 39-week period. Estimating ‘average’ costs is difficult as there are many variables such as the type of course, the institution, and the geographical location. However taking things into consideration such as the costs of books, rent and tuition fees we can get some idea of the numbers.

To put these figures into perspective, according to the NUS the average cost of sending a child to University in London is estimated to be £23,521 per year. (2013/2104) The average course length is 3 years with many students studying for longer and of course we must not forget that this cost is per child.

So when should you start saving? Well if you start in time the good news is that you have up to 18 years during which to save a university nest egg for your child. The bad news is that many experts believe that nothing less £70,000 will be enough to see a child through University.

Lets put this into perspective. If you were to save £25 per month, over an 18-year period, assuming an annual rate of return of 5%, this would only generate about 8,750 Pounds. A far cry from even the cost of 1 year at University.

What if you don’t have the money?  

Many parents encourage grandparents, godparents or friends to contribute to the savings pot. Again the earlier this is put into place the better, 

What about loans and funding? 

Help is available for students, such as taking a student loan or a student grant, but it is important to remember that these need to be paid back (with interest) and often students finish their further education under a mountain of debt before they have even begun work.

Where should I save? 

With interest rates at an all time low you should consider some sort of equity based investment. These have historically produced far better returns over longer periods than high-street banks and of course if you are saving in the UAE then typically you will be earning zero interest on your savings anyway. There are various education plans available that have been designed exactly for this purpose. Having a separate equity based education fund allows you to take advantage of often greater returns while keeping your child’s funding separate from any saving or retirement funds you may already have in place.

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