How to invest in your child’s education

by Eamonn Walsh QFA

It’s expensive to put your child through school and/or university, so the sooner you start saving, the better, writes Eamonn Walsh a Qualified Financial Advisor
The recent removal of a student from a fee-paying school for non-payment of fees has thrown the difficulties people face in meeting the costs of education into sharp focus.
While for most of the population private schools aren’t on the agenda, a “free” education in Ireland still costs money when you factor in necessities such as uniforms, books and registration fees.
It is widely accepted that educating a child in the public system to third-level costs about €60,000.
With university fees reintroduced, parents may need to have substantially higher savings for those expensive years.


HOW MUCH WILL IT COST?
A recent Independent commissioned survey estimated that the annual cost of attending a public primary school was about €1,200 a year, taking into account such costs as transport, uniform, books and food. For secondary school, the annual costs rose to more than €2,000. So, to educate a child all the way up to the Leaving Certificate will cost you about €22,000.
On average, parents can expect to pay about €4,000 a child a year for private school. If you include transition year, this brings the cost up to €24,000 a child for secondary school only, or €56,000 for both primary and secondary.
On top of the aforementioned everyday expenses, this would bring your expenses up to €78,000 – all before university!
If fees are introduced across the board for Irish students and you don’t qualify for a grant, the cost of attending university for a child living away from home will jump to €60,000 over the course of four years.


HOW MUCH DO I NEED TO SAVE?
When it comes to putting money aside for your children’s education, two things are key – starting early and saving consistently.
The best place to start is with child benefit, although this has become less attractive of late. The current rate for child benefit is €140 per month for the first two children, rising to €148 for 3rd child and €160 for subsequent children.
Nevertheless, for a family with one child, saving this amount each month from the time the child is born and get a return on your money of 4 per cent, you will have a nest egg of some €50,000 by the time the child is 18 – almost enough to pay for college, even if further fees have been reintroduced.
Of course, you will have to index-link your monthly contributions to keep up with inflation to ensure that you keep up with the rising costs of education, and you will also have to deduct Dirt at 23 per cent from interest earned on the account.
If you take more risks with your investment and manage to achieve an average return of 8 per cent per year, then your nest-egg will be closer to €80,000.


WHAT SHOULD I INVEST IN?
Several financial institutions offer a variety of savings products dedicated to helping pay for education. Deposit accounts are often the most popular, but beware of the fine print.
When saving child benefit every month, the difference between earning a rate of return of 4 per cent compared to 1 per cent over 18 years is a whopping €12,900. So it pays to keep shopping around for the best rates.
While deposit accounts may be best suited to parents with older children, if your children are very young you might do better by investing in the stock market.
Like savings accounts, there are some stock market-based products dedicated to saving for an education but again, this doesn’t mean that they are the best choice.
How do I choose an investment that is right for me?
As an investor, you want to achieve the highest possible return at a level of risk that suits you. The key is finding a balance between the amount of risk you are willing to take and the potential returns you want to achieve.
There are four main asset classes you can invest in, these include Cash (ie.deposit accounts mentioned above)   Equities (stocks and shares),   Property and Bonds (ie.post office bonds etc).

So by dealing with your local broker who has access to all the different investment options above, and after completing a “Risk Profile Questionnaire” you can be assured you are getting the most independent and best advice available for your childrens education.

Eamonn Walsh is regulated by the financial regulator as an Authorised Advisor and Mortgage & Investment Intermediary.
Eamonn can be contacted at 086-0471147 or info@ewalsh.ie
15 Bank St, Templemore.

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