Smarter college savings options

Third level participation rates have increased, but so has the cost of education

Third-level education participation rates in Ireland are higher than ever, with some 58% of people aged 15 to 44 having a third-level qualification in 20221.  Education expenses are substantial, and as students reach third-level education, the financial strain on parents becomes even more pronounced. Indeed, according to recent estimates by UCD and UCC, the current minimum estimated monthly cost of sending children to college living away from home is as follows:

Based on these numbers, the minimum estimated cost of a four-year degree in UCD for a child living away from home is over €65,0002.  Of course, living at home significantly reduces this cost, as accommodation often represents the most significant expense. However, additional costs like transportation and living expenses can quickly accumulate for those living at home. DCU estimates the estimated average monthly expenses of €709 for those living at home4.

While financial support is available to students, such as taking part-time jobs, student grants, and loans, many children still need financial assistance from their parents to help them alleviate some of the financial pressure of attending third-level education. Therefore, a key financial need of many parents intending to send their children to third-level education is to systematically build the funds necessary to support their children’s education by initiating a Regular Savings Plan or a lump sum investment.  These plans empower your clients to take control of their financial situation and ensure their child’s educational needs are met.

Investing child benefit in a Savings Plan

The table below vividly demonstrates the substantial growth potential of regular savings through a Savings Plan from a life company. For instance, by saving the government child benefit of €140 per month for ten years, parents could amass savings of €17,561 by investing in low—to medium-risk funds or almost €19,000 by investing in higher-risk funds.

Source: Aviva August 2024.  These are hypothetical scenarios and do not represent any investors’ experience. A gross investment return of 3.15% per annum is assumed in the above calculations based on the Aviva Passive Plus ESG 3 Fund.  A gross investment return of 5.75% per annual is assumed in the above calculations based on the High Yield Equity Fund.  The figures shown allow for 0.9% Annual Management Charge deduction for the Aviva Passive Plus ESG 3 Fund and 1% for the High Yield Equity Fund.  On encashment, partial encashment, assignment, death or on each 8th anniversary of the policy, tax is deducted on gains made. The figures shown allow for the deduction of tax (currently 41%).   These returns are not guaranteed. The actual returns will depend on many factors, including the prevailing market conditions. You can find the actual performance of these funds on the fund centre on avivabroker.ie.

Help your clients’ make the grade with Aviva’s Savings Plan and Investment Bond, by giving them access to:

• A range of strong performing funds.6