By far the biggest expense in raising children is third level education. My first grandchild was only born last November and already my daughter has set up an account for her third level costs in 18 years!
Recent research estimates that it costs about €42,000 to put a young person through college over four years, a figure that will rise significantly if plans to reintroduce full college fees proceed. John Lowe of MoneyDoctors.ie investigates.
If you think that’s bad, just ponder on the cost of sending an American-born son or daughter to Harvard: $80,000 per annum for three years, totally $240,000 and that’s before accommodation and expenses. It is no wonder graduates in the US are now acclimatised to repaying their own student debt over the first 10 years of their working lives. We are not quite there here 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? For some families, there may be little left in the kitty to provide for their children’s education.
Even if they could put away the monthly Child Benefit (€140) from the time the child is born until their 19th birthday when it stops, 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 third level education without fees.
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. Also, if you just saved it and received no interest you would have accumulated only €30,240.
The important word when it comes to saving for your children’s future third level financial requirements is start. So here are 3 ways to kickstart that third 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.
The best provider currently is AIB Bank at a jaw-dropping 3% per annum (and that’s before DIRT tax deduction), and if you leave the fund there the interest rate drops to 0.1! Bank of Ireland also offer 3% per annum, allowing €2,500 per month to be invested for that year, a total of €30,000, and then their interest rate drops down to 1%.
2. GoldSaver 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. With GoldSaver operated by www.goldcore.com, 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, the barometer of volatility, could prove to be a real winner in 18 years’ time when your child goes to college.
3. Stock Market Regular Saver
There is no better asset class when it comes to top returns over any 10 year period (1991 to 2020 – the annual average growth was 10.72%). 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, such as government bonds, cash funds, to #6 high risk, such as emerging markets, technology and energy stocks and BRIC countries 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 LifeSaver Special Savings Plus is only €100 – the maximum if you can afford it is €2,500 per month. Zurich insurance are one of the best capitalised companies and have an excellent performance record coupled with minimal costs.
Irish Life, the best credit-rated (AA) and biggest insurance company in Ireland, offer Multi Asset Portfolio managed funds (MAPS) with its unique comfort feature Dynamic Shares to Cash – automatic switching from aggressive funds to cautious/passive funds triggered by global economic events. The minimum contribution, though, is €250 per month.
You can email me jlowe@moneydoctors.ie for details of any of these three saving ideas. Happy saving!
The views expressed here are those of the author and do not represent or reflect the views of RTÉ.
For more information, click on John Lowe’s profile above or on his website.