Third-level education can be expensive and with today’s low interest rates, relying on traditional deposit savings alone often falls short. In this article, Karen Deenihan discusses how parents could find better ways to save for their children’s college education.
Third level participation rates have increased, but so has the cost of education
Third-level education participation rates in Ireland are higher than ever, with some 58% of people aged 15 to 44 having a third-level qualification in 20221. Education expenses are substantial, and as students reach third-level education, the financial strain on parents becomes even more pronounced. Indeed, according to recent estimates by UCD and UCC, the current minimum estimated monthly cost of sending children to college living away from home is as follows:
Based on these numbers, the minimum estimated cost of a four-year degree in UCD for a child living away from home is over €65,0002. Of course, living at home significantly reduces this cost, as accommodation often represents the most significant expense. However, additional costs like transportation and living expenses can quickly accumulate for those living at home. DCU estimates the estimated average monthly expenses of €709 for those living at home4.
While financial support is available to students, such as taking part-time jobs, student grants, and loans, many children still need financial assistance from their parents to help them alleviate some of the financial pressure of attending third-level education. Therefore, a key financial need of many parents intending to send their children to third-level education is to systematically build the funds necessary to support their children’s education by initiating a regular savings plan or a lump sum investment. These plans empower parents to take control of their financial situation and ensure their child’s educational needs are met.
Investing child benefit in a Savings Plan
The table below vividly demonstrates the substantial growth potential of regular savings through a Savings Plan from a life company. For instance, by saving the government child benefit of €140 per month for ten years, parents could amass savings of €17,561 by investing in low—to medium-risk funds or almost €19,000 by investing in higher-risk funds.
Maximising the potential of idle cash in the bank by investing it to fund education
There is over €155 billion in household deposits, with 89% of these deposits earning an interest rate of 0.13%5. It’s easy to conclude that much of this money on deposit could be used by parents to build up the funds needed to help finance their children's education. It's crucial to consider the opportunity cost of not investing. For instance, if a parent invested €10,000 for their child in a lump sum investment policy, the table below shows the potential value of their investment after 10, 15, and 20 years, underlining the potential gains they could be missing.
Help your education savings make the grade
With Aviva’s Savings Plan and Investment Bond you have access to:
- A range of strong performing funds.6
Growth of €10,000 lump sum gross of fees for popular funds to 01 August 20246
- A wide range of funds across managers, asset classes and risk profiles.
- Fixed Deposit Funds currently paying attractive rates may be available through Aviva’s Investment Bond.
- 4 easy access options on Aviva’s Savings Plan and 3 on Aviva’s Investment Bond.
- Minimum premiums from €100 per month for Aviva’s for Savings Plan and €10,000 single premium for Aviva’s Investment Bond.
- Competitive charges – Our Fixed Allocation Range is 0.10% lower than standard pricing as well as our star-performing High Yield Equity Fund being available at standard pricing.
- Tax efficient options – Aviva’s Children’s Savings Investment Trust allows parents to gift up to €3,000 to each child tax free in any year (€6,000 per couple).