The cost of educating a child from primary school to college is estimated to be well over €70,000, a not insignificant amount of money. By far the biggest expense is incurred during a time when a child is in third level education.
Recent research estimates that it costs about €42,000 to put a young person through college, a figure that will rise significantly if plans to reintroduce fees proceed.
If you think that’s bad, just ponder on the cost of sending a son or daughter to Harvard in Boston Mass... $80,000 per term... 4 years - $ 960,000!
It is no wonder graduates in the US are now acclimatised to repaying their own student debt over the first ten years of their working lives. We are not quite there yet in Ireland.
So how do cash strapped Irish parents provide for this necessary expense if we wish to see our children given the same opportunities parents themselves may have received or simply, want their children to receive?
For some families, there may be little left in the kitty to provide for their children’s education. Even if they are able to put away the Child Benefit - now €140 for the first child - from the time the child is born until their 18th birthday (it stops on their 17th) and if that accrued sum of money had a net return of 3% per annum, the total amassed would be just short of €42,000 – the precise amount required for a child’s 3rd level education without fees. Also you cannot get 3% on ordinary deposit accounts now.
However the vast majority of parents use the Child Benefit from day one for the purpose it is there – to help financially support the family through the years.
The important word when it comes to saving for your children’s future 3rd level financial requirements is START. So here are 3 ways to kick start that 3rd level plan :
1. REGULAR SAVER ACCOUNT
Most of the deposit takers offer these type of saving accounts. You are not allowed to lodge lump sums into them, just a regular monthly lodgement between €100 and €1,000 per month for up to 12 months.
You may withdraw at any time without penalty. Best providers currently are EBS at 3% and KBC Bank who offer 2.5% but you have to open an "extra current account" with them to qualify for the 2% bonus – it is only 0.5% otherwise.
2. GOLD SAVER ACCOUNT
GoldSaver is a regular savings account, but instead of saving in euro, pounds or dollars the account facilitates saving in the form of real gold - bullion. Account holders can buy gold online on a monthly basis with a minimum monthly purchase from as little as €100, paid conveniently by direct debit.
Account holders can also make additional lump sum deposits at any time. Considering the delicate state of the global economy, gold could prove to be a real winner in 18 years’ time when your child goes to college.
3. STOCK MARKET REGULAR SAVER
Now in the 9th year of the 2nd longest Bull (rising) market of all time (longest was 1987 to 2000, spoiled by the dot.com bubble burst...) the stock market has proved time and time again to be the best return of any asset class over any period of time.
As Warren Buffett once famously said: "the stock market is a mechanism for transferring wealth from the impatient to the patient"… one such way to enter the stock market is though managed funds.
One insurance company, Zurich, offer a regular monthly saving plan with their 5 Prisma funds, ranging from #2 cautious – government bonds, cash funds to #6 high risk – emerging markets, technology and energy stocks, BRIC countries etc where you determine the percentage to invest in each fund.
You can swap these funds at any time from risk to cautious and vice versa. The real benefit is the fact the minimum monthly investment in their investment called LifeSave Special Savings Plus is only €75 – the maximum if you can afford it is € 2,500 per month.
Zurich insurance is one of the best-capitalised companies and has an excellent performance record coupled with minimal costs.
You can email me @ firstname.lastname@example.org for details of any of these three saving ideas. What's the key message? Yep, get started!
For more information click on John Lowe's profile above or on his website.