How to Fund Your Child’s Education

August 21, 2017
Harvest News
How to Fund for Education - Financial Advice- Pension Advice

How to Fund your Child’s Education ? – The €50,000 degree and how to fund it.

Well done to all the students who received their leaving cert results last week! For many the excitement continues with CAO offers being issued this morning and decisions to be made about third level courses!

For students living away from home, funding a four year degree will cost just under €50,000 according to estimates in the Dublin Institute of Technology (DIT) Cost of Living Guide survey (2017/18).

                                                      Cost of Academic Year 
Students renting in Dublin                             €12,495
Students renting outside Dublin                    €11,766
Students living at home                                   € 6,789

So how can you fund this?

For those with young children (or grandchildren) there is time to plan. Take for example a parent setting up a savings account to save the monthly children’s allowance of €140 per month. Over 18 years, with an average deposit rate of 2% per annum, this will grow to €36,424 after 18 years.

Given the long time horizon for the investment, if the money was saved monthly in to a well diversified investment fund with an average return of 6% per annum, this could grow to €54,501 after 18 years.

Annual Growth 2% 6%
Monthly Saving €140 €140
Term (years) 18 18
Expected Value €36,424 €54,501

The difference in return of over €18,000 would fund an extra year and a half of the degree! 

If you’re looking at way to help fund your grandchildren’s education, the Small Gift Exemption allows you to gift €3,000 per annum to each grandchild without it impacting on their inheritance tax thresholds. Investing this money, rather than saving it in a deposit account, can have a significant impact on the amount available when it is needed for third level.

Annual Growth 2% 6%
Annual Saving €3,000 €3,000
Term (years) 18 18
Expected Value €65,522 €98,280

Investment accounts for children need to be set up a certain way to ensure that the benefits accrue in the child’s name rather than their parent/grandparent. This will avoid any future gift tax liability when the child turns 18 years and receives the funds. The investment decisions remain with the parent/grandparent.

For more information on how you can make your savings work harder for you, please contact your Harvest Financial Services Client Manager or call us on 01 2375500.

 

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