Practical ways to help with the cost of higher education
Being accepted into university is a proud moment for your teenager and the start to a promising future. However, the learning curve isn’t confined to their studies – for many students’ university also teaches them the realities of financial independence and how to manage their own money.
University is a costly game and the financial toll isn’t the yearly tuition fees alone, there are also living costs to consider. According to the National Student Money Survey the average cost of attending university is around £61,000 for a three-year degree, or approximately £20,340 per year.
This figure includes the tuition costs of about £9,250 a year which equates to £27,750 for a three-year course. Next are the living costs which can vary greatly from area to area, however the NSMS estimates an annual living cost of £11,088, or £33,264 over three years.
What’s included in university living costs?
You might think that student’s living costs are mostly made up of nights out and fun with friends, but in reality, the biggest living costs are rent and food bills. The average UK student reported spending around £924 a month to live away from home while studying at university. This includes around £418 per month on rent and a further £165 each month for food including groceries and takeaways.
Other elements that contribute to student’s living costs include things such as transport costs (£54), mobile phone bills (£18), and clothes & shopping (£35).
How can you help with the cost of university?
When it comes to helping your child or grandchild cover the costs of university its best to prepare as early as you can. We recommend opening a junior ISA so you can gradually put money away for their future and to use for help while they’re at university. There are two types of Junior ISAs to choose from, a stocks and shares ISA or a cash ISA, find out which one is right for you in our previous article.
Friends and family can also contribute towards a junior ISA up to the savings limit of £9,000 a year (as of 2022/2023)
Help from Gran & Grandad
Many grandparents choose to help with university costs as a way of passing on their inheritance and reducing inheritance tax liabilities. Grandparents can pay into a junior ISA or gift money to their grandchildren up to a limit of £3000 each per year – so that’s up to £6,000 per year.
It is possible to gift more than £3000 per year if you wish, but this comes with a stipulation that the gift will count towards the estate total if you die within 7 years of making the it, so this is something to bear in mind. While there might not be an immediate tax liability with your gift, it could be imposed at a later date.
Preparing children for financial independence
For most teenagers, living away from home at university is the first time they will experience financial independence. Use this as an opportunity to educate them about the ins-and-outs of managing their money. For example explain to them how to budget, how to manage bills, and how to stay out of trouble with overdrafts and credit cards.
Ask for financial advice
Are you planning to support a child through university? Our financial advisors can help you devise a tax efficient plan so you can provide the support your child needs to succeed at university.