Every parent wants to give their child the best possible chance in life and there’s no better opportunity than getting a good education.
Yet how much does that education really cost and are parents preparing properly to cover their child’s expenses when it comes time for them to go to college?
According to the Zurich Cost of Education Survey 2018 most parents underestimate the cost of sending a child to college, regardless of whether they live at home, in student accommodation or a privately rented house or apartment.
The Zurich study found that the biggest jumps in spending were on student accommodation (increased from €2,628 in 2017 to €3,442) and private rented accommodation where third level students can expect to pay between €3000 and €4000 each year.
The average cost of third level fees also rose significantly from €2,066 to €2,419 per year while the number of college students shelling out more than €900 per year on transport costs nearly doubled in 2018.
Perhaps not surprisingly, the cost of third level education can creep up on parents with 52% going into debt to cover the cost of their child’s college expenses.
That’s why planning for your child’s education and starting a savings plan early is so important, not only to give your child the best chance starting out in life, but to help you keep your own financial and lifestyle goals on track.
Take the example below where a savings plan can help cover college and rented accommodation costs for two children currently aged 2 and 5.
You might be surprised to learn that regular savings can perform better in the long run than a lump sum investment, even in volatile markets.
Regular investing (on a monthly basis) takes advantage of both up and down markets.
That means that when markets are strong, portfolio returns will be higher, and when markets fall, more units will be purchased for the same investment which leads to greater returns in the long run. The key is to give your investment time to grow.
The graph below compare the performance of a lump sum investment and regular monthly savings in the same fund over the same period of time.