Making Cents: Get the best from savings to fund college costs

Making Cents: Get the best from savings to fund college costs

Tomorrow is a big day for more than 50,000 Irish students and their families, with Leaving Cert results being issued in schools all around the country and online tomorrow morning. The majority of the class of 2019 will now move on to college and further training, an exciting but expensive time.

The Technological University Dublin (TU Dublin) released its annual Cost of Living Guide earlier this year, and put the average cost of going to college for students living away from home at a whopping €12,171 for the upcoming academic year.

While Dublin is suffering most in the housing crisis, leading to exorbitant rents, costs are also high in other cities, particularly Cork and Galway. Even if a student can live at home while attending college, the annual cost is still estimated at more than €6000.

If you have a child currently in the primary school system or not yet in school, these costs may seem like a distant concern. But the earlier parents begin to save, the easier and less painful it is to fund your child’s third level education. “The most important word when it comes to saving for your child’s education is ‘start’,” said Karen Goodliffe, Director of HerMoney financial advisors. “The earlier you start, the easier it is to manage your finances.

For example, if your child is starting college in 16 years’ time, and living away from home, you would now need to save €250 per month in order to accumulate €48,000 by 2035. Whereas, if your child is starting college in four years’ time, in 2023, you would now need to start saving €1,000 per month.

She suggests the first consideration for parents when looking at how and where to save your money is how long do you have? If your child is going to college in the next five years then realistically you only have one choice of where to save and that is into a bank or credit union deposit account.

This is because there is not enough time to look at investment options and you are foregoing growth for safety. The assets which tend to give the best returns over the long term — stocks and shares — can be volatile in the short term.

Parents should get the best possible interest rate to maximise their savings, comparison websites such as www.bonkers.ie are useful in helping compare the various deposit interest rates. Just remember you will also pay DIRT on the interest.

If you have a decade or more until your child will do their Leaving Cert, HerMoney suggest the State Savings Scheme is an attractive option for parents who want to save a lump sum of money for the medium to long term.

“The huge benefit with this type of account is your savings are not subject to any DIRT,” they explain. “The interest rate is fixed. For example, it’s currently 1.5% AER fixed on a 10-year bond. For example, if you deposited a lump sum of €10,000, this means at the end of 10 years, if you do not touch your money in the account in the interim, you could earn interest of over €1,500.”

If your child is very young, you can look at alternative investments which offer potentially better returns. These come with varying levels of risk so, unless you are an experienced and confident investor, get professional financial advice.

Hermoney say their most popular options available are investment and savings policies through the various life companies. These policies enable you to invest in a range of funds from low to medium to high risk and will accept lump sums of money as well as regular monthly savings from as little as €75 per month.

“Many of our clients opt to invest in multi-asset funds within these policies which spread their money across a number of different asset types, such as shares, property, bonds and commodities,” they explain. “Investing in multi-asset funds means the value of your investment has the opportunity to generate higher return over the longer term in order to both grow your money and also to try and ensure you beat inflation.”

While it can be hard to imagine the college years when your child is yet to start school, your future self will thank you for making an early start to saving.

Deal of the Week

With the Premier League back and underway at the weekend, football fans may well be sonsidering their winter viewing plans. One package worth checking out is Virgin's ultimate sports package.

Virgin promises the package will provide a host of Champions League action on offer for just €55 per month.

The new package includes Virgin's TV, 250Mb broadband and both Virgin Media Sport and Sky Sports, as standard.

All 343 Champions League and Europa League matches will be live on Virgin Media Sport and the inclusion of Sky Sports mean plenty of Premier League games too.

Viewers will also have acess to international qualifying games, GAA PGA Tour and more.

The price will rise significantly after 12 months but as it is a 12- months contract, you will be free to move again when it does. Found out more at virginmedia.ie

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