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Understanding the cost of Higher Education: How to financially support your child through University
My daughter is now in the second term of her three-year degree course in Liverpool. She is enjoying life and her studies but is well aware that the privilege of higher education doesn’t come cheap.
As you’d expect from a financial adviser, we’d been putting money aside in anticipation that she may go to university. Still, a school meeting on the financial implications was eye-opening even for me!
So how much does university cost and what support is there?
Tuition fees
Every university (bar those in Scotland for Scottish students) charges a course fee, usually £9,250, per year. However, for peace of mind, students can take out a tuition fee loan1 that fully covers these costs. Students don’t see this money in their bank accounts; it’s paid directly to the university.
Accommodation costs
This is where it can get expensive and complicated!
Universities aim to house first-year students in ‘halls’ – campus-based accommodation or accommodation run on their behalf. These tenancies run for around 40 weeks during term time and tend to include electricity, gas bills and sometimes Wi-Fi.
Depending on where the university is, weekly accommodation prices generally range between £130 and £220. However, monthly accommodation costs in London can top £1,000!
Maintenance loans2 are intended to help towards accommodation costs. For some students, this will be sufficient to cover rent and help with other living costs such as food, travel, phone bills and socialising. For others, the support may be less encompassing as it’s scaled according to the student’s parents’ income.
Students who live away from home can receive up to £10,277 for the 2024-25 academic year (£13,348 if they’re studying in London). However, if your household income is around £63,000, your child will only be entitled to a maximum of £4,651 in maintenance loan.
So, if your child is in £150 per week accommodation for 40 weeks this will cost £6,000, leaving students whose parents earn over the £63,000 threshold with £1,349 to self-finance.
Adding living expenses to the mix
If your son or daughter needs a further £500 per month to cover living expenses, they’ll need to find around £7,500 a year for accommodation and everything else if they receive the minimum maintenance loan. This adds up to £30,000 on a four-year course – no small amount for any household.
It’s perhaps not surprising that more than a third of students (34%)3 are now choosing to live at home while studying at university compared with 20% pre-pandemic. Maintenance support is also available for live-at-home students on a scaled basis.
Like many students, my daughter has a part-time job to help her pay her way through university. That’s no bad thing. And, through saving, we’ve provided her with a buffer so she can focus on her studies and not worry too much about how to finance the day-to-day.
So, how much should you save for your kids to go to university?
University costs are only likely to rise further, so if you’ve got a baby on the way or young children, start setting money aside so university doesn’t seem like such a daunting financial option.
First, let’s look at your saving options.
You can set up a Junior Individual Savings Accounts (JISA)4 from birth and allow the money to grow tax-free. The JISA is in the child’s name, and the money will belong to them when they turn 18.
How much do you put in? Whatever you can afford. It’s best to be consistent, even if it’s a small amount. Family members can use it to deposit birthday and Christmas money or ongoing donations.
If you can afford to, consider setting aside some or all of your child benefit payments. Most parents may be eligible to claim £104 per month for their firstborn.
For example, if you put £90 of child benefit each month into a Stocks & Shares Junior ISA at a rate of 5.59% (after any fees), your child would have £31,0245 by the time they’re 18. Of course, the amount could be higher or lower depending on how well your investments perform over this long period.
If you can’t afford to lock away the full £90, saving even £20 or £25 per month can still create a significant savings pot.
And if your child decides university isn’t for them, no problem. They can use the money to buy a car, put it towards a house deposit, rent, or even travel the world! However they decide to use it, they will be forever grateful to you for giving them a head-start.
As your toddler grabs your hand, the university years may seem a long way off, but there’s merit in planning ahead. I can help you save with a specific goal in mind. Contact me today to arrange a no-obligation meeting.
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1Gov.uk website - Undergraduate student finance
2Gov.uk website - Undergraduate student finance
3The Complete University Guide – Blog 21st August 2023
4Gov.uk website - Junior ISA
5Calculated using Voyant Cash Flow Planning, regular contribution of £90 per months, child age 2 months
