HOW MUCH WILL IT COST? Scottish (and non-UK European Union) residents can attend a Scottish college or university free of charge, but tuition fees cost up to £9,000 a year south of the Border.
Former Chancellor Alistair Darling said in the recent independence debate that 130,000 college places had been cut to fund free tuition in Scotland. No matter what the outcome of the vote in September it might prove difficult for future governments to hang onto this legislation. Edinburgh University has suggested that living costs are as much as £8,000 a year. Taken together, tuition fees and living costs could amount to £68,000 for a four-year course.
WHAT’S YOUR TIME-FRAME
Taking into account inflation at, say, 3 per cent then the cost of putting a child born today through higher education at age 18 would cost £115,800. A five-year-old with 13 years to go and a ten-year-old with eight years to go would have to find £99,900 and £86,200 respectively. The further away the objective the more appropriate it is to invest in the stock market to increase your chances of strong capital gains over the long term.
HOW MUCH SHOULD I SAVE?
If we use the three examples above then the requirement is £299 a month, £425 a month and £702 a month respectively, assuming an annual average growth rate of 6 per cent after charges, fees and tax. Bear in mind this growth rate is likely to reduce as you decrease exposure to volatile equity funds the closer you are to the point of accessing the money.
CONSIDER OTHER INCOMES
Gifts from family members, such as grandparents, could be put towards this objective, while you could also consider putting aside child benefit for this purpose. When your child has reached university age, grants, bursaries and scholarships might be available depending on your child’s situation. Government help and student loans (though repayable) could also help. Your child might work part-time while at university – providing another income stream.
BE TAX EFFICIENT
Make sure you save and invest in the most tax efficient way possible. The new individual savings account (Isa) allowance is £15,000 a year, while other options include junior Isas, offshore bonds and placing assets in a bare trust. Take expert advice.
• David Gow is a chartered and certified financial planner at Acumen Financial Planning in Edinburgh.