Saving child benefit from birth could build up a college fund of €41,000, according to experts at financial services firm Gallagher.
With CAO results due out this Wednesday, the company is reminding parents of the importance of planning and saving for college as early as possible.
The latest TU Dublin Cost of Living Guide reveals that sending a child to college in Ireland can now cost as much as €74,780 over the course of a four-year undergraduate degree - if they're living away from home.
"This guide, which is for the upcoming academic year, estimates that annual expenses can range from €11,378 to €18,695 for a student living away from home, which adds up to between €45,512 and €74,780 for a typical four-year degree," said Jonathan Roche-Kelly, Director of Financial Services for Gallagher in Ireland.
"Even those living at home incur around €6,977 per year in transport, books, and other living costs," he added.
Mr Roche-Kelly pointed out that for new parents, or parents of children in primary school, by the time their children start college, the college bill will likely be much higher than this due to inflation.
With this in mind, Gallagher in Ireland has shared some advice for parents.
1 Start early
By starting to save for a child's third-level education early, Mr Roche-Kelly said you can accumulate a substantial fund to cover future educational expenses, reducing the financial burden when the time comes.
"Long-term investments benefit from compound interest, where the returns on your investment generate their own returns over time, significantly increasing the value of the savings," he explained.
2 Choose the right savings plan
According to Gallagher, a life assurance saving plan is one option you could consider when saving up for college costs.
Another option is a regular savings account, though the deposit interest earned on such an account could be much lower than the investment return you could make on a good life assurance savings plan.
"If you were to save the child benefit of €140 a month from a child's birth to the age of 18 into a life assurance savings plan, it would equate to a total fund after all charges and tax of €41,366.30, assuming an annual investment growth rate of 5.5%," Mr Roche-Kelly said.
"By comparison, if you were to save the monthly child benefit into a deposit account with no interest between birth and the age of 18, this would equate to a total fund of €30,240."
3 Avoid risk if you only have a short time to save up for college
If you only have a short time horizon of less than five years to save up for a child's college education, Mr Roche-Kelly said a regular savings plan with a better-than-average interest rate may be more suitable as with a short time frame, you would have less scope to take on investment risk.
"Remember, you will lose one-third of any interest you earn on your savings to Deposit Interest Retention Tax (DIRT)," he said.
"The interest you earn on a regular savings account may also not be enough to surpass inflation, meaning inflation will eat into the value of your savings over time."
4 Get advice
Mr Roche-Kelly advises seeking impartial advice from a qualified financial advisor before deciding on a savings plan.
"He or she will also be able to advise how much you need to save to hit your target, the products that could make it easier for you to do so, as well as the risks and caveats you need to be aware of," he added.
