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Saving for your child’s university education

With all the financial responsibilities parents have now, it can be difficult to look far into the future. However, the harsh reality is that, if you want your child to have a university education, you need to start saving from the minute they are born.

Many teenagers are actually deciding against a university education these days as the mounting debt scares them off before they have even looked at the courses on offer. As well, the fees, accommodation and living costs also need to be considered – the average university debt is now coming in at just over £25,000. That is a scary amount to owe before your child has even entered the world of work. It is not all doom and gloom, however, as there are several ways you as parents can help without it taking too much of a toll on your finances. The key is to start as early as you can. Here are a few of the best options when it comes to saving for your child’s university days so it doesn’t seem so daunting.

Savings account

This is the easiest and simpliest way to save for your child’s university education. There are several accounts on offer on the high street, all with different criteria for saving. Some ask you to deposit a certain amount each month, while others give you full rein to add to the account whenever you have some spare cash. The danger is that you always may find something more urgent to spend the money on and the account could lie dormant for years. A good savings account can give you about a 3 per cent interest rate at the moment but you need to shop around to get the best deal. Make sure you also mention to your bank what it is for. Interest rates can sometimes become more favourable if the bank knows you will not be drawing the money for quite a few years.

Child Trust Fund

For children born after September 2002 but before January 2011, a trust fund was set up by the government with an initial payment of £250 deposited into it. This could then be added to by family in the hope that when the child was 18 and could draw from the account, there would be a nice healthy figure in it. The government initiative was set up to encourage parents to save and was actually a pretty good idea, especially since any growth on the account was tax free. For example, a payment of £100 a month could have resulted in £35,000 by the time the child was 18 – a nice amount to set them up in further education. Although the scheme was rather short-lived, there are still a huge amount of children who can benefit from it if born between these dates.


For children who do not qualify for the Child Trust Fund, an ISA can do a very similar job if set up when the child is born. Again, a monthly amount or a yearly lump sum is deposited into the account and any interest gained is tax free. The interest in these accounts is normally much higher than standard savings accounts so they are a great option. You need to decide, however, how much you wish to deposit each year – a maximum amount of £5,340 can be put in an ISA each tax year.

Junior ISAs

These are ISAs specifically to help you save for your child’s future. They are a long-term, tax-free way of saving and a child can qualify for one if they are under 18, live in the U.K. and are not already entitled to a Child Trust Fund Account. They cannot draw the funds until they are 18, and parents can choose between a cash ISA or a stocks and shares ISA.

More on saving for the future

10 Easy, everyday ways to save money
Saving money in these economic times
Money management strategies can reduce stress for students

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