Paying for higher education
When the price tag is big, the planning had better begin early.
And the price tag is certainly big when a child wants to attend university or technical college in the UK. A three-year university course costs around £27,750 in fees alone in England or Wales.1 The average living costs for a UK student across that period come to £14,355, based on a 39-week student year.2
Of course, higher education can pay off in the long run but, in the meantime, students are entering the workplace heavily in the red. Graduate salaries don’t always offer much scope for paying off debt, especially once you factor in rent.
Where to put your money
But starting early isn’t all that matters – getting the tax right can make all the difference too. Tax-advantaged wrappers such as ISAs and Junior ISAs help parents and grandparents to save for a child’s future.
Well-laid plans can even reduce your Inheritance Tax (IHT) bill, For example, everyone can give away up to £3,000 a year without the gift being liable for IHT when they die. Put the full £3,000 gifting allowance into a Junior Stocks & Shares ISA every year from a child’s birth, and a tax-free sum of £87,664 could be available to the child by the time they hit 18, assuming a 5% annual growth rate after charges.
Choose your borrowing
It might be tempting for your child to take out a student loan to pay for university – and, of course, it might be necessary. It can be a difficult decision, however, given that your child or grandchild may well have no idea when they will end up earning enough to have to pay back the loan. (The threshold is £1,577 a month, after which 9% of their surplus salary must go towards repayments.)3 They may end up not having to pay it all back; on the other hand, if they get a well-paid job, they’ll have to pay back both capital and interest which, depending on your view, either makes it worthwhile or chips away at its long-term financial benefits.
There are other advantages to saving for a young child’s higher education or training. By freeing them up from borrowing large sums to pay for their education, they will have greater capacity to get onto the property ladder once they start earning – a step that looks increasingly challenging.
The value of an investment with St. James’s Place will be directly linked to the performance of the funds selected and the value may fall as well as rise. You may get back less than the amount invested.
The levels and bases of taxation, and reliefs from taxation, can change at any time and are generally dependent on individual circumstances.