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<\/p>\nJohn Lowe of MoneyDoctors.ie looks at how parents may tackle finances when raising little ones.<\/p>\n
It is estimated that the current cost of raising a child from birth until completion of their third-level education is just short of a whopping \u20ac250,000.<\/p>\n
Recent Bank of Ireland research revealed that 80 per cent of parents said they do not believe the current Child Benefit of \u20ac140 per child is sufficient to help them with their children\u2019s education expenses.<\/p>\n
In addition, 86 per cent of parents surveyed for the study said that any further reductions in the child benefit allowance would leave them in a “financially difficult” position when it comes to funding their children’s education.<\/p>\n
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The cost of educating a child from primary school to college is estimated to be well over \u20ac70,000, a not insignificant amount of money. By far the biggest expense occurs during a time when a child is in third-level education. The research estimated that it costs about \u20ac42,000 to put a young person through college, a figure that will rise significantly if plans to reintroduce fees proceed.<\/p>\n
Half of all parents surveyed said they planned to buy a larger size school uniform for their children, while one in five intend to reduce pocket money by up to 50 per cent in order to pay for school-related expenses.<\/p>\n
Bear in mind, the average pocket given to children in Ireland is:
– National – \u20ac10 per week ( \u20ac520 annually )
– Secondary – \u20ac20 per week ( \u20ac1,040 annually )
– 3rd level – \u20ac60 per week ( \u20ac3,120 annually )<\/p>\n
Nearly one in three parents will spend less on extra-curricular activities for their children due to the current economic environment, while over half will be looking to purchase second-hand schoolbooks, schoolbags and uniforms this year.<\/p>\n
The phrase, ‘you can’t get blood from a stone’, rings true when income dictates the priorities. Maslow\u2019s Hierarchy of Needs sees food, accommodation and clothing as man\u2019s primary needs and in that order. For some families, this is reality – especially in these challenging times.<\/p>\n
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So how do cash-strapped parents provide for this necessary expense if they wish to see their children given the same opportunities they received?<\/p>\n
For some families, there may be little left in the kitty to provide for their children\u2019s education. Even if they are able to put away the Child Benefit – \u20ac140 – from the time the child is born until their 19th birthday, that account, without any interest, would accrue to \u20ac30,240, still some \u20ac12,000 shy of the fund needed to send that same child to third-level for four years.<\/p>\n
The important word when it comes to saving for your children\u2019s future financial requirements is START.<\/p>\n
Even the regular saver account \u2013 available in most financial institutions \u2013 is a mechanism to initiate a savings ethos. You save between \u20ac100 and \u20ac1,000 a month for up to 12 months, after which you can then switch to a longer-term, higher-yielding investment.<\/p>\n
Best demand rates for the regular accounts is An Post Money\u2019s whopping 0.75% (net 0.5025%).<\/p>\n
Alternatively, you could invest with a reputable insurance company\u2019s choice of funds, where over the longer term and historically proven (average annual stock market growth from 1991 to 2020 was 10.72%), the stock market has proved to be the best asset class.<\/p>\n
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To justify the decision to invest in a stock market option, many of the insurance companies offer managed funds for such saving purposes, especially regular stock market saver accounts \u2013 the return should potentially, at least, be a great deal greater than the best deposit interest rate on the market.<\/p>\n
Two stock market regular saver investments include Zurich\u2019s LifeSaver account with their Prisma funds and Irish Life\u2019s Pinnacle account and their Multi Asset Portfolio funds ( MAPS) \u2013 email me for details.<\/p>\n
You need at least five years in terms of investment period \u2013 no withdrawal penalties after five years. Should you be in the position where you have the funds now and wish to allocate them to a safe, long-term return, then you should also consider the State Savings\u2019 10-year National Solidarity Bond.<\/p>\n
This might fit the bill where you will currently receive 22% tax free on maturity – \u20ac 36,000 becomes \u20ac43,920 after 10 years (equivalent to a gross rate of 3% per annum) and the 3rd level costs, virtually sorted for one child.<\/p>\n
The views expressed here are those of the author and do not represent or reflect the views of RT\u00c9<\/p>\n