Question: Although our children are young, my husband and I are starting to think about how we can save for their college fund. We’d like to get ahead so that there’s not as much financial pressure when the time comes, but we’re not sure where to start.
Our sons are aged four and six at the moment – what kind of money should we be putting aside each year? Are there special savings plans or similar that we can use?
We’re based in the Midlands, so there’s a good chance they’ll have to commute or rent when the time comes, so we want to allow for this possibility in our savings.
Answer: As parents, it’s natural to want the best for our kids, especially when it comes to their education. It’s also natural to worry about the financial implications of higher education because, let’s face it, the cost of college these days can be overwhelming for families.
By planning so far ahead, you’re giving yourselves a good head start. With some strategic financial planning, you can help your children have access to quality education without sacrificing your own financial stability.
It helps to divide our answer into two parts – first, understanding costs, and second, setting savings goals. The first part informs the second, and both are equally important.
Understanding college costs in Ireland
Let’s take a closer look at college expenses in Ireland.
Recent research from Zurich Life suggests that the average cost of attending a university in Ireland can range from €25,844 (if your child lives at home) to €66,152 (if they live in student accommodation).
These figures include a wide range of expenses, including textbooks, tuition fees and cost of living. As you would expect, living away from home will really drive up your savings goal.
The location of the college or university will also have an impact – accommodation in Dublin can escalate up to €10,800 per year while Galway is lower at approximately €6,800 annually.
Setting savings goals
So, how much should you be aiming to save each year? Finding your figure starts with setting realistic goals based on both your own financial situation and what you envisage for your kids’ education.
Let’s crunch some numbers to get there.
If we estimate that each child’s four-year college education will cost around €50,000 in today’s terms, and factor in an annual inflation rate of 2%, we’re looking at roughly €12,500 per child per year. What’s the best way to get to that figure?
Martin Glennon, Head of Financial Planning
With your timeline, long-term savings are the way to go. And in Ireland, there’s no shortage of long-term options to choose from. Let’s have a look at a few of the most popular ones:
1. Regular savings accounts:
These are a simple yet effective way to set aside money for our kids’ futures. Every bank will have their own options, such as Bank of Ireland’s SuperSaver or ChildSave account options, AIB’s Online Saver or PTSB’s Online Regular Saver accounts.
While they may not offer the highest interest rates, ranging from 2-3%, they provide a safe and accessible way to save consistently.
2. Education savings plans:
Some financial institutions offer specialised plans designed specifically to help families save for college, such as Zurich’s LifeSave Savings Plus Plan or Aviva’s Children’s Savings Investment Trust.
These plans offer diversified investment funds that pool money from multiple investors and invest in a range of assets such as stocks, bonds, and property.
While they carry higher risk due to market fluctuations, they also offer the potential for greater growth compared to traditional deposit-based savings accounts. In addition to Zurich and Aviva, long-term education plans are available through life assurance companies such as Irish Life and New Ireland.
3. Government savings schemes:
The Government offers various savings schemes that provide a secure way to save over the long term. While they may not offer the highest returns, they provide peace of mind and guaranteed yields.
There are a variety of plans offering different rates depending on the saving schedule that best suits you, with their long-term (10-year) option currently offering 2.01% AER.
More information on this type of scheme is available online at statesavings.ie or through An Post.
As you weigh up your options, it’s important to keep a few things in mind.
Your risk tolerance is particularly important to assess – some people are comfortable choosing risk for potentially greater rewards, while others would rather know that their money is secure.
The investment horizon and your own financial goals will also play a role in determining the best savings strategy for your family.
Whatever route you choose, automate your savings, if possible, as this will ensure consistent contributions without the need for ongoing effort on your behalf.
And, of course, as your kids grow older and your circumstances possibly change, you’ll need to be flexible and adjust your plan.
Martin Glennon is Head of Tax at Ifac, which is the professional services firm for farming, food and agribusinesses
Set an informed savings goal and look into all the long-term savings options available to you.If you have no or low-risk tolerance: keep it simple and safe with Regular Savings Accounts or Government Savings Schemes.If you have greater risk tolerance, you could potentially avail of greater growth with Education Savings Plans from life assurance companies. Read more
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Question: Although our children are young, my husband and I are starting to think about how we can save for their college fund. We’d like to get ahead so that there’s not as much financial pressure when the time comes, but we’re not sure where to start.
Our sons are aged four and six at the moment – what kind of money should we be putting aside each year? Are there special savings plans or similar that we can use?
We’re based in the Midlands, so there’s a good chance they’ll have to commute or rent when the time comes, so we want to allow for this possibility in our savings.
Answer: As parents, it’s natural to want the best for our kids, especially when it comes to their education. It’s also natural to worry about the financial implications of higher education because, let’s face it, the cost of college these days can be overwhelming for families.
By planning so far ahead, you’re giving yourselves a good head start. With some strategic financial planning, you can help your children have access to quality education without sacrificing your own financial stability.
It helps to divide our answer into two parts – first, understanding costs, and second, setting savings goals. The first part informs the second, and both are equally important.
Understanding college costs in Ireland
Let’s take a closer look at college expenses in Ireland.
Recent research from Zurich Life suggests that the average cost of attending a university in Ireland can range from €25,844 (if your child lives at home) to €66,152 (if they live in student accommodation).
These figures include a wide range of expenses, including textbooks, tuition fees and cost of living. As you would expect, living away from home will really drive up your savings goal.
The location of the college or university will also have an impact – accommodation in Dublin can escalate up to €10,800 per year while Galway is lower at approximately €6,800 annually.
Setting savings goals
So, how much should you be aiming to save each year? Finding your figure starts with setting realistic goals based on both your own financial situation and what you envisage for your kids’ education.
Let’s crunch some numbers to get there.
If we estimate that each child’s four-year college education will cost around €50,000 in today’s terms, and factor in an annual inflation rate of 2%, we’re looking at roughly €12,500 per child per year. What’s the best way to get to that figure?
Martin Glennon, Head of Financial Planning
With your timeline, long-term savings are the way to go. And in Ireland, there’s no shortage of long-term options to choose from. Let’s have a look at a few of the most popular ones:
1. Regular savings accounts:
These are a simple yet effective way to set aside money for our kids’ futures. Every bank will have their own options, such as Bank of Ireland’s SuperSaver or ChildSave account options, AIB’s Online Saver or PTSB’s Online Regular Saver accounts.
While they may not offer the highest interest rates, ranging from 2-3%, they provide a safe and accessible way to save consistently.
2. Education savings plans:
Some financial institutions offer specialised plans designed specifically to help families save for college, such as Zurich’s LifeSave Savings Plus Plan or Aviva’s Children’s Savings Investment Trust.
These plans offer diversified investment funds that pool money from multiple investors and invest in a range of assets such as stocks, bonds, and property.
While they carry higher risk due to market fluctuations, they also offer the potential for greater growth compared to traditional deposit-based savings accounts. In addition to Zurich and Aviva, long-term education plans are available through life assurance companies such as Irish Life and New Ireland.
3. Government savings schemes:
The Government offers various savings schemes that provide a secure way to save over the long term. While they may not offer the highest returns, they provide peace of mind and guaranteed yields.
There are a variety of plans offering different rates depending on the saving schedule that best suits you, with their long-term (10-year) option currently offering 2.01% AER.
More information on this type of scheme is available online at statesavings.ie or through An Post.
As you weigh up your options, it’s important to keep a few things in mind.
Your risk tolerance is particularly important to assess – some people are comfortable choosing risk for potentially greater rewards, while others would rather know that their money is secure.
The investment horizon and your own financial goals will also play a role in determining the best savings strategy for your family.
Whatever route you choose, automate your savings, if possible, as this will ensure consistent contributions without the need for ongoing effort on your behalf.
And, of course, as your kids grow older and your circumstances possibly change, you’ll need to be flexible and adjust your plan.
Martin Glennon is Head of Tax at Ifac, which is the professional services firm for farming, food and agribusinesses
Set an informed savings goal and look into all the long-term savings options available to you.If you have no or low-risk tolerance: keep it simple and safe with Regular Savings Accounts or Government Savings Schemes.If you have greater risk tolerance, you could potentially avail of greater growth with Education Savings Plans from life assurance companies. Read more
Money Mentor: is joining a company pension scheme worth it?
Money Mentor: switching loans for better interest rates
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