University Fees – what Parents need to know
As you know, University is not free. Most courses cost £9,500 a year and accommodation is likely to set a student back £5,000 when all is said and done. Add in money to eat, drink, buy the odd book and probably £100 a week is not unreasonable to live off…. In 2013.
The impact of inflation
So let’s suppose that you have not yet even had your child. Let’s assume that you are expecting shortly in 2014. So your yet to be born student will be entering University in say 2033, aged 19. £20,000 of fees with inflation running at a consistent 3% becomes £35,070… and you have a three year course, so total costs are likely to be £108,400 (roughly). So you have 19 years before any money is needed – but needed it will be in 2033, 34 and 35.
Get an early start
If we assume an investment return of 5.50% (not exactly blowing the lights out) but this is still a real return of 2.50% above inflation investing £250 a month will do the job. However, you’ve got a lot of commitments with your new baby, never mind a possible drop in income. So you decide to delay saving… until you are clearer about educational prospects. So let’s suppose you wait until your baby is a teenager at 13 with 6 years to go before University life. The maths is the same, you simply have less time to squirrel money away and of course less time for it to grow. Well, now you need to find £1,950 a month to achieve exactly the same result.
What is financial planning?
The thing about financial planning, is that its not really about any financial products. Its about helping you to figure out what you want to do. We review our assumptions together – here we made assumptions about inflation, investment returns, University fees, going to University and when. The same logic applies to any goal, we need to figure out what something costs today, allow for inflation and the time until you aim to achieve it. So, whether you have a University challenge… here is your starter for 10… when will you begin your financial planning?
Dominic Thomas: Solomons IFA