The cost of higher education has increased by over 200% in the last 10 years – university tuition fees in England are now over £9,000 a year. That's an eyewatering sum, but there's financial support to cover course fees.
Another thing that will always impact the financial implications of studying at university is the cost of living.
Yes, there are loans to help, but they're means tested. That means the amount of money a student gets is reduced depending on parental income. Parents or part-time student jobs are then expected to top this up.
If contributing is a route you want to go down, it's not easy to predict how much to save. In England, experts predict that it costs up to £7,833 a year for university accommodation alone. That's £23,499 over three years. However, depending on how young your child is, these numbers are likely to change – especially with the cost-of-living crisis.
The best way to combat this is by getting a head start. The earlier you start saving – or investing – the better. Here's how to set that plan in motion depending on what stage your child is at.
In this article we explore how you can make your child's academic dreams come true without compromising on your future, but this isn't personal advice. If you're not sure if a course of action is right for you, seek financial advice.
They're about to start university
If you're contributing already, there are still a few ways to make your money work harder.
A good place to start is your savings, especially if you haven't checked in on them in a while.
Currently bank rates can be as low as 1.1%, and you could get a much better deal.
It's worth looking into high yield, easy-access accounts. This way you can access your money whenever you want, and still earn interest.
You can currently get 4.54% (AER) and 4.45% (Gross) through Active Savings. This rate will get you nearly triple the interest compared to the lower rate above. Every penny counts, and it's better in your pocket than a bank's.
Just remember inflation reduces the future spending power of money. Products available can be added or withdrawn at any time and minimum deposit requirements apply to individual products.
They're potentially starting university in the next few years
This is where a fixed-rate account could come in. Here you lock your money away for a set period, for a guaranteed rate of interest.
How long you fix for is completely up to you. For example, through Active Savings you can pick between as little as three months to five years.
The best bit is by fixing you tend to get better rates than an easy access product, but you won't be able to take your money out until the term ends.
With a 5.76% (AER) and 5.76% (Gross) interest rate on our top one-year fixed-term account at the moment, you'll earn over one percentage point more than our best easy-access account. This increase would result in 33% more interest compared to the easy-access option if you were to save £200 a month.
You want to get a head start
We all want the best for our children. If you've got a budding academic and a long-time horizon (that's at least five years), then investing could be the way to go.
Once you've built your emergency cash fund, investing can give you the potential to grow your money by more than sitting in cash. More importantly, it can help your money keep up with or beat inflation – especially over the long term.
Plus, there's over 122 years of data showing the stock market has beaten cash in 91% of ten-year periods.
Remember, past performance isn't a guide to the future. There's no guarantee this will continue and unlike cash, investments rise and fall in value, you could get back less than you put in.
Saving for your child's university education is a long-term commitment that requires a budget and careful planning. But by starting early, you can give your child a bright future without sacrificing your financial stability.
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AER (Annual Equivalent Rate) shows what the interest rate would be if it was paid and once each year. It helps you compare the rates on different savings products. Once you have opened a fixed term product the rate won't change, but rates on easy access products can vary.
Gross means the rate without any tax removed. Interest/profits are paid gross. You are responsible for paying any tax due on interest/profits that exceed your Personal Savings Allowance to HM Revenue & Customs. Tax treatment can change.
This website is issued by Hargreaves Lansdown Asset Management Limited (company number 1896481), which is authorised and regulated by the Financial Conduct Authority with firm reference 115248.
The Active Savings service is provided by Hargreaves Lansdown Savings Limited (company number 8355960). Hargreaves Lansdown Savings Limited is authorised and regulated by the Financial Conduct Authority (firm reference number 915119). Hargreaves Lansdown Savings Limited is authorised by the Financial Conduct Authority under the Electronic Money Regulations 2011 with firm reference 901007 for the issuing of electronic money. Hargreaves Lansdown Asset Management Limited and Hargreaves Lansdown Savings Limited are subsidiaries of Hargreaves Lansdown plc (company number 2122142).