Advice to the parents of Tipperary’s 179,000 school goers – early starts and consistency will go along way to ensuring you save the €E40,000 needed to put your child through 3rd level education
As back to school time rolls around experts outline some savings and investment strategies for those who want to put money aside for their children’s education – but may be a little late off the mark...
There are 41,000 children under 19 in Tipperary, many of whom will go on to 3rd level education in the years to come however according to financial experts at Acorn Life, the looming costs associated with children’s education is a cause for concern for many parents.
Chris Long of Acorn Life in Tipperary commented, “As we approach the back-to-school time of the year parents throughout the country are feeling the pinch of the cost of school books, fees and uniforms. That’s why we believe that now would be a good time to ask parents to look at funding for the children’s education and perhaps, if at all possible, put in place some long term saving measures if they haven’t already done so. There are 52,300 households in Tipperary so the this advice will apply to the parents in many”.
Acorn Life say that the investment or savings strategy a family assumes for their child’s or children’s education will be dependent on the length of time they have before the fund is needed. While ideally people would start saving when the child is born this is often not feasible due to affordability and other issues. It’s important however for parents to bear in mind that college education is very expensive and looks set to grow in expense. This can put a significant amount of financial pressure on those families that are ill prepared when the time comes.
Chris continued, “If you can start the savings habit early, no matter how small the amount, you will save yourself a lot of financial heartache in the long run. What we have seen growing in popularity is the tendency of parents to set aside the Governmental Child Benefit Allowance from an early stage - helps to ensure that the benefit is ring-fenced and goes towards the child as intended”.
For those families who were unable to start the savings early all is not lost. According to Acorn Life there are low risk savings options available to those with lesser time to spare and for those for whom time is slightly more on their side then there are also slightly high-risk investment products that may well be suited.
Chris explained, “If for example you were to assume that the current cost of putting 1 child through 3 years of college is €E40,000. At 2% inflation, this would rise to €E44k in five years time or approximately €E50k in ten years time. In order to save up for a lump sum of €E44k in five years, an individual would need to save about €E650 every month (assuming a 5% annual interest rate). Over a five year period we would recommend setting money aside in a separate account with your local Post Office or bank.
However, if the family had ten years in which to save but the cost grew to €E50k in this time then they would need to save about €E315 every month for the next ten years (assuming a 5% annual interest rate). Over a 10 year period some element of equity investment in a managed fund should outperform deposit rates available under shorter term investments”.
The experts at Acorn Life contend that when it comes to children’s education, which is typically longer term - it’s the length of time and the discipline of regular saving that are most important. After that you want to make sure that you are invested in a product that has a track record in fund performance and has low charges, which are best understood through the reduction in yield on the product. Clients often take out savings products for their children’s education within a year of the child being born.
Chris went on to say, “Everyone’s situation is different however, for those whose children have to move away for third level education then it’s obviously going to be more expensive. We would estimate that savings of up to €E12,000 can be made for those students who remain at home as expenditures such as rent, food, utilities and travel will be reduced”.
Chris concluded, “Unfortunately, there is no definitive answer as to how much putting one or more children through third level education will cost – particularly with the Government mooting the reintroduction of third level fees. However it’s definitely better to have some savings set aside which can be subsidised nearer the time than to have nothing at all and be left in a predicament whereby you have to find thousands of Euro in a limited timeframe”.
Acorn Life is a leading Life Insurance provider regulated by the Central Bank of Ireland and a member of the Irish Insurance Federation. It is an independent Irish owned company with its Head Office based in Galway, providing a wide range of financial services. Acorn Life has assets of €E455 million and premium income in excess of €E80 million.