30s: Gain Momentum
30s: Gain Momentum
How To Fund Your Child’s Education
by The Gloss
Something shifts in your 30s. Life speeds up, the future feels closer, and suddenly the long-term financial decisions you once pushed aside start to matter a whole lot more. If you’re starting or growing a family, education quickly becomes one of the biggest expenses to think about. Looking at the projected costs can be intimidating, but this decade is your opportunity to get ahead. By understanding what schooling and university are likely to cost – and building a plan now – you can remove the uncertainty and create a financial foundation that supports your kids for years to come.
A Costly Lesson
When it comes to second-level education, many parents are opting to send their children to private or fee-paying schools. The most expensive private schools charge over €14,000 a year for day pupils and up to €31,000 a year for boarding. That is before you add the costs of grinds, activities and Irish college.
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When it comes to university, in addition to standard fees, consideration now must be given to surging inflation, higher rents and rising food prices. Costs of up to €60,000 and above is a major expense in the future.
How To Manage Costs
An understanding of the potential costs of education and a clear deadline to work towards should clarify your investment objectives and define a concrete outcome for your saving plans.
Instead of having to figure out how you are going to pay school or university fees out of current spending when the time comes, you can know in advance that it’s taken care of.
In other words, saving enough comes down to a question of ‘how much?’ rather than ‘if’ or ‘when.’
The best place to start is with child benefit – it’s a simple and convenient way to build up an education lump sum without even making an extra effort.
Child benefit payments align perfectly with long-term education saving – they are untaxed, monthly and run for eighteen years, so they can be particularly beneficial to fund third-level costs. If feasible, parents could put this aside every month to help towards their child’s future education costs. While it’s a small hit to your cash flow, it alleviates a significant future expense.
If these funds were saved on a monthly basis into a well-diversified investment fund for eighteen years, with an average return of 5 per cent per annum, it has the potential to grow to over €50,000.
Parents may need to consider additional funding for extracurricular activities and so on. There are several investment options out there for parents – the right option for your family depends on whether you have a lump sum upfront or whether you prefer to make contributions over time.
Another consideration is the Small Gift Exemption, which parents and grandparents may wish to take advantage of. Each parent or grandparent can individually give a maximum of €3,000 (the tax-free annual gift allowance) per annum to a child or grandchild.
That way, both parents and / or both grandparents could transfer a maximum of €6,000 per child per annum which is currently outside the inheritance tax net. Again, investing this rather than saving it can have a significant impact on the amount available when it is needed for education costs.
Planning Ahead Is Key
Remember, when it comes to putting money aside for your children’s education, two things are key – starting early and saving consistently. That way, you’ll be better prepared to wave your child off to college when the time comes.
By starting early, saving consistently, and using tools like diversified investments, child benefit, and tax efficient gifting, you can turn what seems like a daunting expense into a manageable, well planned commitment. With thoughtful planning today, you’ll be far better prepared to support your children for years to come.
SEE MORE: Case Study – How Much Money Should I Set Aside For My Family?
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