Over the past 20 or 30 years, successive governments have withdrawn financial support for university education. According to studies by the Centre for Economics and Business Research, the average total cost of educating a child to the age of 21 is £52,881, up from an £32,594 in 2003. The research also shows that the highest annual cost is during the college years - 18-21 years old - when the amount parents expect to shell out each year is an average of £13,677. Long-term saving vehicles, such as fixed cash ISAs, investment ISAs can offer good returns over a 20 year period, and tax-free interest - which can then help meet the cost of university education.
The costs of tuition and nutrition
For students entering higher education, costs fall into two main categories. Firstly, the cost of living, such as rent, clothing and food. Although student grants are a distant memory, in some cases the government will help in the form of student finance.
The other main cost of putting your offspring through college is now tuition fees. After a political struggle, the Labour government succeeded in introducing top-up tuition fee is 2004.
For 2010/2011, the maximum charge allowed for tuition fees is £3,290. The exact cost will depend on the college, and you can get a loan to cover it, paid direct to the college. However, the government is reviewing this upper limit to fees and could scrap it all together. Again, student finance can help, if you are eligible.
If you are not likely to have the £13,677 of ready cash each year to pay for student education , and you do not want to borrow the money yourself or leave your children in debt, there is the prospect of saving for your children’s education from early in their lives.
An ISA, or individual savings account, can offer a good approach to long-term saving, because the interest you earn will be tax-free, but getting the best ISA deals can seem difficult or a bit confusing. As a guide, the longer you are prepared to lock your money away, the more likely you are to get a better return.
An investment ISA, which uses stocks and shares can offer good returns, but they will depend on the performance of the stock market, and you could lose money should the stock market fall.
A fixed rate cash ISA will guarantee you get your money, and you don’t risk losing it. But interest rates and inflation can rise, reducing the real value of your money.
There is an annual limit on the ISA, currently £3,600 in a cash ISA and up to £7,200 for a stocks and shares, or the total of both. This will increase to £10,200 for overall ISA savings, and up to £5100 for the cash ISA from April this year. However, there is no limit on the maximum amount that can be held in the ISA, so if you are saving over more than 10 years until your child goes to college, you could build up a tidy sum, and earn significant amounts of tax-free interest in the process.
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