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Parents urged to save to cover kids’ tuition fees

Parents urged to save to cover kids’ tuition fees

Category: Savings

Updated: 18/02/2011
First Published: 17/02/2011

MONEYFACTS ARCHIVE
This article was correct at the time of publication. It is now over 6 months old so the content may be out of date.

Parents have been told they need to start saving £82 each month as soon as their child is born if they are to cover the cost of the new university tuition fees cap.

The prospect of university fees rising to as much as £9,000 per year means parents will have to find up to £27,000 if they plan to pay for their child's three year undergraduate degree.

If parents do not start saving until their child is five years old, the required monthly figure rises to £129.

Worryingly, the amounts calculated by Family Investments are sufficient to cover tuition fees alone; the cost of living or any future increases to the fees have not been factored in.

With the average direct debit into a Child Trust Fund currently £24 per month, the mutual says that parents are currently not saving enough to cover the increased fees.

While meeting the monthly payments required to pay the new fees is likely to be beyond most families which are currently seeing their household income squeezed, Family Investments says that parents shouldn't be put off.

"Most parents are looking for simple products that will provide a significant return over the long-term, but they are understandably cautious about risk when saving for their children," said Kate Moore, head of savings and investments at Family Investments.

"It is important to take a long-term approach to saving for your child and accept the fact that there will be ups and downs along the way.

"When it comes to creating a savings pot for the amounts needed to cover tuition fees of up to £9,000 a year, it really is the case that the sooner they start the higher the chances are that they will reach their goal.

"Parents who delay saving will face an uphill struggle as it becomes difficult to chase a total."

If your child is born before 2011, then they should be eligible for a Child Trust Fund account towards which the Government will have sent you a voucher to kick-start their savings.

When you receive your child's voucher, this will need to be invested in a Child Trust Fund account.

However, if your child doesn't qualify for a Child Trust Fund, then you still have options.

An account such as the Family Investments Junior Bond is a tax-friendly, long-term savings plan which your child is still entitled to.

Requiring a monthly investment of between £15 and £25, the Junior Bond is free from income tax and capital gains tax and you decide when your child gets the money.

Find the best savings rates for your child - Compare savings accounts

Read our Changes to Child Trust Funds Guide

Download FREE Child Savings Plan brochures


Disclaimer: Information is correct as of the date of publication (shown at the top of this article). Any products featured may be withdrawn by their provider or changed at any time.

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