Planning for your child’s university/trade school
You may not be surprised to hear that there’s a lot to think about when you have children.
For many parents, saving for university or trade school is an important part of looking after their children and helping them achieve their dreams.
That said, many of the ideas in this piece also apply to other ways you can make a difference for your children when they reach adulthood – from paying for a wedding to helping them get on to the property ladder.
When they’re little: Understand the costs
If your children are still little, there’s only so much planning you can do about university or trade schools. After all, the fees that students paid 18 years ago – and how they repaid them – weren’t the same as the current situation. However, one thing you can count on, sending your children to university is unlikely to be cheap.
Depending on where you live, the cost of this education will fluctuate, especially if your child decides to go to school in another region or country. Even if the upfront tuition cost is low, there are costs that you may not be considering.
Accommodation can be a major expense, especially at universities in big cities, as is the impact of not being able to earn income due to the dedication to studying.
Out-of-pocket expenses do not end with accommodation. Students will probably need to buy books and university/trade equipment and they may need to commute from their accommodation to their courses. Then there are the basics: food and drink, clothes, socialising, exercising, and so on.
Put simply, it’s a lot.
When they’re little: Start Saving
Students can get a lot of help with these expenses, but most of it comes in the form of loans that have to be paid back – with all the associated stress that debt can bring. Being in a position to help them could make a world of difference and not just to their peace of mind. It’s a lot easier to concentrate on your studies if you don’t have to work part-time jobs to pay the bills or struggle to afford the necessary course materials.
There may be various tax efficient ways for you to save for your child’s university or trade school, depending on what country you live in. You should work with a local financial or tax advisor to see if these exist. If so, you may be able to benefit from reduced (or no) income and/or capital gains taxes.
Whether or not your investment has tax advantages, you should aim to save into these accounts on a regular basis and build up a significant sum over the long term. If possible, you may want investments that offer potential capital gains (as you would for other long-term savings). The power of compounding amounts and returns is substantial over time.
When they’re older: Start talking
Saving for university or trade school is unlikely to be something you get done in a year. It’s a gradual, ongoing process where you put aside what you can, when you can. This means it makes sense to talk with your child about their further education as soon as they’re in a position to start thinking about it.
While many teenagers don’t really know what they want to do, some have a much clearer idea of where they want to go with their lives. If this won’t be taking them to university or trade school, you can change your plans accordingly – as the money you would be saving may be used more effectively somewhere else.
They may be thinking about an apprenticeship, for example, or looking at joining the armed forces. Alternatively, they may want to set up their own business and see the traditional options as time (and money) they could use more effectively by getting started.
Even if they’re sure they want to go to university or trade school (or are just following the path of least resistance), talking about it well before the time can help them get a clearer picture of the benefits and the costs. You can also encourage them to start their own savings. Even if this is not a large amount, having to spend money that they’ve spent several years putting aside can give them a much greater appreciation of what it represents – so they could, potentially, use it more sensibly.
When university or trade school is getting closer: Start researching
In the last few years before higher education, it’s time to look at what’s available to them. Your child may have access to loans, grants and student discounts, which can reduce a lot of costs, making day-to-day expenses more affordable.
Loans can often cover the full tuition cost of a course and students typically don’t need to start repaying them until their earnings have reached a minimum level. There are also maintenance loans for living expenses, which vary depending on how and where you go to university/trade school.
Depending on your location, some government grants may be available for students in specific situations, such as those who are disabled or need help with child care.
There may also be grants from other organisations, for example charities or bursaries that target more specific groups of students, costs or courses. Your child could even be eligible for a scholarship if they’re a high achiever.
In some places, there are also some companies and other organisations that will sponsor a degree/course. However, it’s worth noting that this may lead to a very different educational experience as the sponsor may put demands on the student’s time.
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