Kick-start savings

02 November 2018

As the costs of tertiary education increase, amid rising interest rates and inflation, parents are finding it increasingly difficult to save and pay for their children’s education. It comes as no surprise that parents are turning to grandparents to chip in to help fund their grandchildren’s education, and contribute toward their family legacy.

Helping to fund education is a great way for grandparents to set their grandchildren up for later in life, and the sooner savings start, the better. Saving over a longer time period helps to minimise risk as investors will be able to ride out slumps in the market.

“Looking at calculations for three years’ of university education, including tuition which is currently up to £9,250 a year, plus accommodation, bills, books, food, phone bill, internet access and other living costs the average cost for a year of University is £22,000 p.a. “ says Mark Albinson, Director The Children’s ISA.

“For a child who has just started school so in Reception Class and is four years old, if you adjust this amount by inflation at 2.5%, they would need over £90,000 to complete a three year course at University. And this is without taking into account potential increases in the cost of education over this time period” He added.  

In some cases, the cash flow implications of saving for a child to go to University are far greater for parents, who are most likely to be paying a mortgage, transport costs, childcare costs and other costs associated with raising children, in comparison to grandparents who are more likely to have passed their peak expenses and have their savings in order.

A simple way for your client’s to save is to invest the maximum Junior ISA allowance into a stocks and shares Junior ISA, ideally as soon as a grandchild is born so that they have a pot to support them in their future education choices. To reach a savings goal to cover £90,000 of education costs by the time a newly born grandchild turns 18, a monthly contribution of £300 would be needed (based on a 5% net return). If you’re stuck for gift ideas, especially with Christmas just around the corner, a Junior ISA could be a great alternative to consider.  

The Children’s ISA, in partnership with Verbatim, offer a range of active and passive investment solutions to accommodate your client’s financial approaches and requirements. A regular contribution from your client from as little as £10 a month can be paid into a Children’s ISA account to help your client’s save for when their children grow up. If you’d like to learn more about how to invest with Verbatim and The Children’s ISA you can contact us on 0808 12 40 007 or visit www.thechildrensisa.com.

The value of investments and any income from them can go down as well as up and is not guaranteed. Your clients could get back less than they originally invested. Past performance is not a guide to future performance. The portfolios' investments are subject to normal fluctuations and other risks inherent when investing in securities. Verbatim Asset Management has taken due care and attention in preparing this document, which is solely for the use of professional advisers. Verbatim cannot be held responsible for any inaccuracies arising out of information detailed within and will not accept liability for any loss arising out of or in connection with its use.