How should I save for university fees?

21 March 2012

Q

I have a 15-year-old son and I’m concerned about paying for his university fees – I don’t want him to end up in debt. Given the cost of UK universities these days, should I be looking at overseas colleges to save money? Also, what is the best way to save for university fees? I also have a sixyear- old daughter; what’s the ideal age to start putting money away for her university education?

From
ML/Bristol

A

The prospect of paying £9,000 a year to study at university is prompting many potential students and their parents to look overseas for cheaper education options. And international universities are well aware of this - many have launched UK-focused advertising campaigns to attract bargain-hunting students.

The table below compares the costs of some international universities; just be aware that while you may save on tuition, other costs, such as living costs, could soar.

University fees in the UK compares to those overseas

CountryUniversityAnnual tuition feesCountryUniversityAnnual tuition fees
UKMost universities£9,000*LatviaRiga Technical University£1,400
SwedenMost universitiesFree for EU studentsNorwayBI Norwegian Business School£7,000
FranceEcole Normmale Supérieure, Paris£640AustraliaInternational College of Management, Sydney£7,500
GermanyTechnical University of Munich£1,000JapanDoshisha University, Kyoto£8,000
The NetherlandsHAN University of Applied Sciences£1,100   

* From September 2012. Source: The Student World, 17 January 2012

When it comes to saving up for tuition fees, the earlier you start saving the easier it seems because you can put aside smaller monthly amounts. A rough but simple process to use to work out when you need to start saving and how much you should be setting aside is to start by working out how much money you would like to end up with.

Then use an online calculator, such as the one at moneyfacts.co.uk/compare/savings/ monthly-savings-plan, to work out how much you need to save each month to end up with that amount of money - you’ll need to make an assumption about an anticipated interest rate return. Also factor in the effect that inflation will have on the purchasing power of your savings.

For your daughter, you could consider a stocks and shares ISA, because you have a long investment term and can afford to take the risk of stockmarket investment in order to reap larger gains over the long term. An ISA will also protect your savings from tax, allowing them to grow faster than they would in a regular savings account.

Your son has only a few years to go so an investment is inappropriate because if the stockmarket falls you wouldn’t necessarily have enough time to recover your losses before the money was needed. A better option for him would be to start saving money into a cash ISA as soon as possible.