With three children’s uni education to finance, this couple must don their money thinking caps
We are a couple in our 40s with three children, aged nine, 14 and 17. We would appreciate advice on how to provide for all three during university. We have relatively limited savings of between £5,000 and £10,000 in Cash Isas and the rest in savings accounts – and we can save £500 every month.
Before building funds to pay for university costs, you need to first secure your own financial future, according to financial adviser Martin Bamford, managing director at Informed Choice.
“That may sound harsh, but a university degree for your children will be little comfort if you’re living your retirement in relative poverty because you have failed to fit your own oxygen mask first,” he says.
Given your position, it’s also important to accept that you won’t be able to fully support each child through the costs of their degree, according to Jason Hollands, managing director for business development at Tilney Group.
“The amount you can save, the time you have, and the costs of college just make that too unrealistic to achieve,” he says. “However, anything you can do is a step in the right direction.”
A university education certainly doesn’t come cheap, warns Sarah Coles, personal finance analyst at Hargreaves Lansdown. Although many graduates won’t end up earning enough to start repaying their maintenance loans, she suggests that there could still be a £650-a-month shortfall between this income and the cost of living.
“Given your eldest will start needing this money within the next couple of years, a savings account where you can earn 1.5% in an easy access account, is the most sensible one to choose,” she says.
If you need to meet the entire £650 shortfall, start saving today, and can afford to save £500 a month, Coles suggests you’ll be able to fund payments for your first child.
“However, you’ll need to dip into just under £5,000 of other savings during your second child’s university course,” she adds.
Investing is more practical for the younger two as they have more time before heading to university, according to Justin Modray, founder of Candid Financial Advice.
“A Junior Isa is a practical and tax-efficient way to invest for them, provided you can trust them not to blow the lot when they turn 18 and gain access to the money,” he says.
If you are concerned that this could happen, Mr Modray suggests that you use your own Stocks and Shares Isa allowances for now – and then give money to your children when they’re at university.
Whichever route you choose, he suggests it’s best to keep things simple. “Either a single Junior Isa each for the younger two children – or a Stocks and Shares Isa for each of you,” he explains.
Diversifying investments is also sensible because taking a too focused approach that ends up backfiring could lead to heavy losses. However, that doesn’t mean that you need to hold a large number of funds.
“Combine some wide-ranging index-tracking funds with a few actively managed funds that cover a range of assets – equities, fixed income and property – and you’ll likely be fine,” he adds.
An equity-based stock market investment is definitely more appropriate when it comes to your youngest child, in the opinion of Mr Bamford.
“This will rise and fall in value between now and when they start university, so you might want to reduce the equity exposure as you get nearer to the time,” he adds.
This is particularly the case should you find yourself sitting on positive returns in the two or three years before they go to university.
It’s worth keeping in mind that your children might be able to take advantage of student loans.
These are more of a graduate tax than traditional debt, points out Mr Bamford.
“Any savings that you can accumulate for each of them can help reduce the amount they need to borrow – or you can supplement their loans so they don’t have to work while studying,” he adds.
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Rob Griffin writes for the Independent, Daily Express and lovemoney.com