College costs €7,000 per annum
THE cost of keeping a third-level student at college for nine months is €7,000 a year and rising €21,000 for a basic three-year degree course.
That's big money and gets bigger if there is more than one child in a family at college or if, as greater numbers do each year, the student takes a postgraduate degree.
That's a huge financial burden for any family, but more and more students are taking the burden on themselves.
The Union of Students in Ireland (USI) Cost of College Survey 2003 shows that more than half the respondents (51%) stated that they intended to finance their study by obtaining part-time employment.
This indicates that at least half the families of third level students have failed to make adequate financial provision for their children's third level education.
Finance or the lack of it has huge ramifications for the choice of college or course a student is going to take.
The USI survey found that 63% of prospective college students said that their choice of college and course would be determined by financial reasons. Not points, money!
The USI found that lack of finance is one of the main reasons many students drop out of college. The fear of mounting bank debt forces them to abandon their studies, get work and plan to return to college when they have saved enough cash. Most never darken the door of a third level institution again.
Irish Life executive consultant in wealth management Colm Roantree said the reality for many parents is that, failing to plan for their children's education means that they end up re-mortgaging their homes. "This option is used very regularly at present, as many parents have good equity in their home. However, it means that parents are taking on loans at a time in their life that they would prefer to be reducing borrowings and increasing pension funds in the last 10-15 years before retirement.
"Financially, it makes more sense to receive interest or growth on savings before the event, than to pay out interest on borrowings after the event," he advised.
Mr Roantree said, when parents are working out how to plan to finance the future education of their children, a number of options need to be looked at in order to select the one that most suits a person's circumstances.
The five year scenario:
Parents with children going to college in five years time should look at unit linked investments and should plan to cover at least the first year of college from current cash flow to permit their investment to mature a bit more.
Only people who know about shares should invest directly in individual equities and even then it is a very risky option.
It would be dangerous to invest in a stock market-based product, as there is insufficient time to recover from a downturn.
The 10 to 15 year scenario:
Ignoring the effects of inflation by saving in a deposit account could be expensive, as education costs rise annually. Stock market based options are more appropriate.
While a deposit account or Post Office account is safe, low interest rates mean the return is not even matching inflation.
Buying shares directly carries a high risk, but has a good potential in the long term.
Equity-based savings plans are really only suitable for those not having a need for funds for eight to ten years.
These are designed to beat inflation and deliver growth. They are suitable for those with a long-term need, but who are not knowledgeable or interested in watching stock markets and shares in individual companies themselves.
Due to the high up-front costs of property investment, such a move is unsuitable for anything less than a 10-year profile.
Property has delivered in the recent past, but may now have greater potential to fall than rise. If the property is mortgaged, rent will be required to make repayments, so it cannot be earmarked for education. So the only way to use the asset for this purpose is to sell.
As Mr Roantree points out: "Ultimately, if you haven't managed to make any prior arrangements, and aren't in a position to re-mortgage, you are going to have to carry the cost within your income cashflow..need we say more?"
