Whether your child aspires to become a doctor, engineer, artist, or pursue any other career path, a solid education will be the steppingstone towards achieving their dreams. By saving strategically, you can provide them with the necessary resources and opportunities to excel and reach their full potential.. In this blog post, we'll provide some practical tips to help you achieve this financial goal.
Tip 1: Create a habit
Starting early is key to maximising your savings potential. Investing early gives your money more time to grow, making it easier to achieve your savings goals without putting undue strain on your finances. Setting realistic savings goals that align with your financial situation is also essential. You can break down the total amount into manageable monthly or yearly savings targets by estimating the total education cost, including tuition fees, living expenses, books, and other associated costs. This approach allows for steady progress while keeping your budget intact.
Tip 2: Understand your spending habits
Understanding your spending habits is also key to making sure you can afford to save for your children's education. There are various helpful apps available that can help you log your income and expenses in one place, giving you a realistic idea of what you can afford to save.
Tip 3: Evaluate your options
You can choose the most appropriate savings and investment options based on how long you must save before your child starts college, with 5+ year options of investment funds available you have plenty of choice. Additionally, you should choose the right savings account based on how much access you need to your money and how much you can comfortably afford to save each month.
Tip 4: Create a dedicated education fund
Creating a dedicated education fund is another practical way to save for our children's education. By segregating these funds from our regular savings or investments, we ensure that they are earmarked for educational purposes.
How Aviva helps your savings make the grade
Aviva's Savings Plan, Investment Bond and Children’s Savings Investment Trust options can help you save for your child's education. With Savings Plan and the Children’s Savings Investment Trust, you can gradually build up the funds necessary to support your child's education starting from as little as €100 a month.
With Investment Bond, you can invest from as little as €10,000 and give your built-up lump sum the potential to grow over the medium to long-term.
Below are examples of two families, one who are regular savers and one who are lump sum investors.
The Regular Investors (Savings Plan)
Alice and John have decided to invest €140 a month into Aviva’s Savings Plan to help pay for their child Annie’s education. The following table shows what their education savings value could potentially be worth after 10, 15 and 20 years.
| Low to Medium Risk Fund - 3.15% per year growth | Higher Risk Fund - 5.75% per year growth | ||
|---|---|---|---|
| Estimated Education Fund Value | After 10 years | €17,561 | €18,989 |
| After 15 years | €27,173 | €30,687 | |
| After 20 years | €37,365 | €44,019 |
Source: Aviva January 2024. Alice and John are hypothetical and do not represent any investors experience. A gross investment return of 3.15% per annum is assumed in the above calculations based on the Fixed ESG 20 Fund. A gross investment return of 5.75% per annual is assumed in the above calculations based on the High Yield Equity. The figures shown allow for 1.15% Annual Management Charge deduction for the Fixed ESG 20 Fund and 1.25% for the High Yield Equity Fund. On encashment, partial encashment, assignment, death or on each 8th anniversary of the policy, tax is deducted on gains made. The figures shown allow for the deduction of tax (currently 41%). These returns are not guaranteed. The actual returns will depend on many factors, including the prevailing market conditions. You can find the actual performance of these funds on the fund centre on aviva.ie.
The lump sum investors
Let’s say Alice and John invest €10,000 for their child Alex’s education in an Investment Bond. The following table shows what their lump sum investment could potentially be worth after 10, 15 and 20 years.
| Low to Medium Risk Fund - 3.15% per year growth | Higher Risk Fund - 5.75% per year growth | ||
|---|---|---|---|
| Estimated Education Fund Value | After 10 years | €11,509 | €13,456 |
| After 15 years | €12,420 | €15,737 | |
| After 20 years | €13,388 | €18,331 |
Source: Aviva February 2024. Alice and John are hypothetical and do not represent any investors experience. A gross investment return of 3.15% per annum is assumed in the above calculations based on the Fixed ESG 20 Fund. A gross investment return of 5.75% per annual is assumed in the above calculations based on the High Yield Equity. The figures shown allow for 0.9% Annual Management Charge deduction for the Fixed ESG 20 Fund and 1% for the High Yield Equity Fund. On encashment, partial encashment, assignment, death or on each 8th anniversary of the policy, tax is deducted on gains made. The figures shown allow for the deduction of tax (currently 41%). These returns are not guaranteed. The actual returns will depend on many factors, including the prevailing market conditions. You can find the actual performance of these funds on the fund centre on aviva.ie.
Wrapping it all up
In conclusion, saving for your children's education is a financial goal that will have a lasting impact on their lives. By starting early, setting realistic goals, creating a dedicated education fund, and leveraging savings and investment options, parents can create a secure financial future for their children.