Ensuring Your Children Get the Best Start in Life
Nowadays, a university education is becoming more and more important for achieving a decent job. Often, the only way onto the career ladder is through a good degree, which is why it’s so important to use financial planning early and save up for your child’s university tuition, to give them that head-start in life.
For the UK, university tuition fees are rising steadily, already at an average of p.a across most courses. However, as obtaining university home status can be unreliable when living abroad, international fees may become a reality, which can end up anywhere between twenty and thirty thousand pounds a year. A rough budget of the costs with their breakdowns is illustrated below, and as an average, we may say that university can cost a year.
Of course, if we factor in an inflation rate similar to the low rates we have historically seen, in 15+ years the K may be worth K in present terms. As a result, a child’s university fees for a 3-year course may cost up to K – clearly, a sensible financial planning strategy is needed. Not to mention the fact that no one wants to leave their children’s tuition to chance – it would be much more desirable to have a guarantee of future tuition. For example, at just monthly payments into a guaranteed plan (at an approximated 4.25% IRR) over 15 years, has been calculated to become as a guaranteed minimum– indicating one such strategy that could be utilised. Of course, this may not suit your individual flexibility and budgetary needs – may prove to be too much, or too hard to maintain monthly for 15 years. As with all financial planning, it should all be tailored to individual needs.
Of course, you may want to help your children with university fees, a deposit for their first home, their wedding or more, meaning that setting up a trust or fund early on is vital. One such method is by using a trust, whereby any capital placed into it is potentially exempt from inheritance tax. Assets will be held in the name of the trustee (most often the parents), while the beneficiaries can access the trust once they turn 18 (in England). This may be a useful method for any parent to take advantage of the child’s income and capital gains tax allowances.
To find out more about how you can utilise financial planning effectively and ensuring you can afford a meaningful headstart for your children, contact Graeme Field (Director and Head of Corporate Services, Credence International) at [email protected]