As another round of students gear up to start university after the summer, the cost of fees and accommodation will be playing on many students and parents' minds. And it seems as though many parents will be in for a shock, after research by the Association of Investment Companies (AIC) revealed that many are vastly underestimating the expense.
On average, the parents surveyed estimated that their child's student debt will be £17,965, a far cry from the actual figure of close to £44,000. Students had a more realistic expectation, although this also fell short (£30,348).
This disparity could play havoc with parents' plans if they intend to help cover their child's costs, and with two-thirds of parents (64%) questioned stating that they wanted to help financially, forking out for university could cause a serious dent in their wallets. Indeed, many parents admitted that they would have to resort to drastic measures in order to help their child, with 9% saying that they would move to a smaller home and 22% pledging to empty their entire cash savings.
Parents of students are not the only ones who will be making potentially large sacrifices: the research also found that one-fifth of students questioned (21%) were planning to, or already do, live with their parents during term time to keep costs down – a figure that rises to 36% of those living in London and 30% of students from lower income backgrounds.
Some students even admitted that they have contemplated leaving university altogether because of the cost – 30% of students in the survey said that this had crossed their mind, with 37% of these saying it was due to the expense.
Clearly, the cost of university can take a heavy toll on both the finances of parents and students alike. For this reason, preparing as early as possible will be key to ensuring that the cost can be met.
Parents who want to help support their child through university would be wise to consider putting money away to create a university savings pot that can be used when the time comes. This way, the likelihood of emptying entire savings accounts of money may be avoided.
If university is still a little way off and you already have a pot to invest, a fixed rate account can be the ideal way to keep a sum intact while earning a return in the meantime. Alternatively, a regular saver can be a great way to slowly build a decent-sized pot as it will encourage regular contributions, or if you need the money sooner, check out the best easy access accounts, which allow you to dip in when you (or you child) need to.
Those who are prepared to take on a little extra risk may also be interested in investigating stocks & shares ISAs. These ISAs may give you a better return, although it must be borne in mind that the investment could go down as well as up. Stocks & shares ISAs are best used over the long term, so if you want to build up a fund over the next few years, they could be a possibility.
Check out some stocks & shares options
Take a look at the best fixed rate bonds
Find the most competitive regular savers
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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