According to new research from Brewin Dolphin, the wealth manager, many people vastly underestimate the cost of sending a child to university.
The survey results show that 9% of respondents believe it will cost under £20,000 to send a child to university, whilst another 30% estimate the figure between £40,000 and £50,000.
However, Brewin Dolphin research reveals if you want to pay your child’s tuition fees so that they leave university debt-free, you will need much more. Tuition fees are currently £9,250 per year, but living costs, which are typically £795 per month. According to Brewin Dolphin’s calculations, three years of tuition fees and living costs would amount to just under £75,000 in 15 years’ time, assuming an inflation rate of 2% per annum.
Amy Pethers, financial planner at Brewin Dolphin, says: “Raising a child is one of the most rewarding things you can do in life – but it can also be very expensive. To ensure you can give your children the opportunities you want for them, it’s crucial to plan ahead. And the financial burden can be more manageable if you put a solid financial plan in place.”
Brewin Dolphin’s research shows that if you invested £500 a month from your child’s third birthday, you could build up a pot worth just over £134,000 by the time they turn 18, assuming an annual return of 5% after charges. This could cover the cost of university tuition and living expenses (£75,000), leaving an additional £60,000 for a wedding or house deposit.
Interest rates on cash are currently very low, which means you’re extremely unlikely to achieve a 5% rate of return by leaving your money in a savings account or cash ISA. Investing your money offers the opportunity for higher returns, although you must be comfortable with the fact that investments go down as well as up.
