As Oscar Wilde famously wrote, “Anyone who lives within their means suffers from a lack of imagination”. Well, for most of us, it takes a fair amount of imagination to dream up ways to stretch our pay cheque to match our wish list – and once you add children and college to the mix, the need for creative thinking becomes even more pressing. John Lowe the Money Doctor gives invaluable advice to those parents embarking on the path to familial happiness :
If you’re starting a family soon or have recently welcomed a little one, now is the time to start planning for their future – because in the blink of an eye, baby will be off to college. Recent reports put the yearly cost of student life at about €12,500 for those studying in Dublin and €11,800 for those outside: that’s €45,000-€50,000 for a typical four-year degree, at current rates. And with college registration fees – let alone soon to be introduced ordinary college fees – jumping significantly in recent times, it would be wise to expect that trend to continue.
Save save save
One of the most sensible, if challenging decisions is to start saving your child benefit payments immediately once your baby is born. Saving €140/month for 17 years ( it stops on the 18th birthday ), even with no deposit interest, brings you to over €28,000 by the time your child is ready to fly the nest. If you’re frugal (or lucky) enough to be able to do so, you should seriously consider banking this monthly benefit.
Check out EBS’ Family Savings Account (1.75% AER – 1.1025% after DIRT tax of 37%): the maximum amount you can save is €12,000, which will take approximately 8 years. After this point, consider moving your lump sum to a 10-year NTMA’s National Solidarity Bond, with a 16% tax free return after 10 years, by which time your child will be 18; and don’t forget to continue saving the €140/month into whatever account is offering the best AER at the time. Alternatively you could avail of this BULL ( rising ) stock market and invest in a regular stock market saving account where the returns could be considerably better but riskier. Email me for details on Irish Life’s Pinnacle investment – € 250 per month minimum, or Zurich’s LifeSave regular investment account ( minimum € 75 per month, maximum € 2,500 ) If you want growth you have to take some risk.
Pass on the habit
Instilling practical financial habits and skills in your children is an invaluable gift. Whether it’s a piggy bank or a Post Office / credit union savings account for their pocket money, teaching them to get into the pattern of building a nest egg is wise. While it might sound a little unconventional, consider teaching them to save or invest their money into a college fund; unlike piggy, this leaves the potential for it to be topped up by any generous relatives at key milestones, like birthdays, First Communions or Confirmations.
Yes, it might be a little soon to know what the 2036 version of the Student Universal Support Ireland (SUSI) grant scheme will look like, but it never hurts to be prepared. Currently, 40% of third-level students avail of grants in Ireland, be those scholarships, means-tested or disability grants. Be sure to keep these in mind in the year running up to your own child’s CAO application, and apply as soon as the schemes open.
Remember, the best defence is a good offense. Saving anything for such an expensive time is better than nothing – and while your child may not think to thank you as a teenager, they’ll certainly be grateful once that degree is in their hand!