Saving for education fees - new factors to consider
Today's long term savers face many challenges. At Blacktower, we want to help you through all financial planning adversity, whether you need advice on regular savings in Grand Cayman or help with inheritance tax planning in France.
One major savings goal that many parents wish to work towards is having enough money to send their children on to higher education. This goal became harder to attain when university tuition fees were increased back in 2012, some by as much as three times. Now, a new proposal may further shake things up in terms of how much money parents will need to save.
The government recently announced plans to give students more options in how they study, proposing the introduction of two-year degrees. The two years will provide students with a more intense learning experience, with reduced holidays and a heavier workload.
Unfortunately, the idea of the two-year degree doesn't do much for the problem of costly fees. Under the plans, the current fees (up to £9,250 a year for a three year course from 2017) will still need to be paid, only the full amount will be split over two years.
This means, if the plans are to be implemented, annual fees could rise to more than £14,000 a year. While this may not sound swingeing, there is a significant upside to the proposed change: with one year less to spend living away from home, the amount needed to support your children with their accommodation and living expenses will be greatly reduced.
"Students are crying out for more flexible courses, modes of study which they can fit around work and life, shorter courses that enable them to get into and back into work more quickly, and courses that equip them with the skills that the modern workplace needs" the Universities Minister Jo Johnson has said. He added that the traditional three-year course "must not be the only option".
The savings challenge for parents
Giving students increased flexibility in how their courses are structured could be an effective change to the education system, and most parents will want to be able to financially support their children whatever the future brings them. But recent economic changes have meant that saving a substantial amount is an increasingly difficult task .
In February 2017, news emerged that inflation, measured by the Consumer Price Index, was at its highest level since June 2014, running at 1.8 per cent. February saw the fourth monthly increase.
The culprit behind the rise in inflation is thought to be the weaker pound, which is making imported goods more expensive.
And the Bank of England has predicted that inflation will rise to 2.8 per cent in the first half of 2018. While some economists think it will rise even higher to 3 per cent.
Uphill inflation is coupled with the other predicament of low interest rates. Both these factors mean savers will find it difficult to grow their money in the coming years.
It may be tough to make long-term savings plans so that you can put your children through university, but it's certainly not impossible. And one key ingredient essential to making the most of your money is a financial adviser you can trust.
Independent financial advice for regular savers
Proper financial management is an invaluable tool. Some saving goals, such as having enough money to send your children on to further education, may take a long time to reach. So, making sure you have the best possible plan in place is vital. It always helps to start as early as possible, so if you think your children may want to go to university, contact a Blacktower adviser today. We can help evaluate your current circumstances and discuss all your education fee savings options with you.