Saving for university – by Jasmine Birtles

Jasmine Birtles is a TV and newspaper journalist and personal finance expert. In her new column she’ll be helping you get the most from your investment and reach your personal goals.  

Passing the exams is the easy part. It’s saving for university that really hurts!

It costs the best part of £45,000 to do a three-year degree in the UK right now. That’s set to go up to at least £60,000 in the next ten years. So it’s not surprising that some parents start saving for their children’s university as soon as, or even before, their children are born.

However, even if you don’t have serious spare cash to put aside for your offspring’s education, there are ways to maximize the money you put in. Follow these steps and you’ll be able to help your kids even with limited resources.

Make full use of the JISA

Obviously the more tax you can save on your investments the better, so use ISA allowances as much as possible when saving for university.

Each child has an annual JISA (Junior Individual Savings Account) limit of £4,250 per tax year until they turn 18. Even if you don’t have that much to put in each year, just investing regular, small amounts each month will mount up if you put it in the right products.

Happily, children have time on their side when it comes to investing. If you start when they’re babies they have a good 18 years for the investment to grow, so you can use a stocks and shares (equity) JISA for them. The returns on these products are much higher than you would get on the average bank or building society cash version. Simple index tracking funds tend to be the cheapest and often the best performing. Encourage the grandparents, friends and other family members to add to the pot at birthdays and Christmas.

Of course, the JISA is in your child’s name and it’s not certain that they will use it for university by the time they get their hands on it at age 18. But if you spend some time educating them in the value of saving and help them to respect money then, even if they don’t go to university, they will still know to put that cash into something sensible once they come of age.

Take out your own Innovative Finance ISA

You also can take out an ISA for yourself and you have an annual limit of £20,000 per tax year. There are a few ISAs to choose from now including the Innovative Finance ISA which enables you put money into an online lending platform, such as Funding Circle, within an ISA wrapper. So any gains you make with your lending come to you tax-free.

If you put your money into the Funding Circle ‘Balanced’ ISA, that has a projected return of 6-7%. Then a monthly deposit of just £170 at 6% annual return, would give you £66,000 in 18 years, and that doesn’t even use up your whole ISA allowance.

Beware of ‘specialist’ products

There are, of course, investment products specifically designed for parents looking to save for their child’s university costs. Some of these may do well but on the whole you should be suspicious of any financial product that has clearly been packaged up for, and advertised to, a particular market. These products often have high fees attached to them and tend to be more about the marketing than the market.

Some Friendly Societies offer specialist products like these but their fees tend to be high. Similarly, well-known investment firms offer specialist products that involve a choice of managed investment trusts that you could put your money into. Usually the minimum monthly investment is £25 or £250 one-off lump sum. Again, though, watch their fees as managed funds are generally more expensive than simple index-tracking funds.

Get the kids saving for university too

One of the best ways to help your kids cope financially when they get to university is to encourage them to earn and save while they are teenagers. They really need the help too, as research by the savings association TISA has found that three in five 14-16 year olds borrow money to pay for something, even though four in five of those surveyed receive pocket money and a third of them have a part time job.

So start by helping them get a Saturday job in a local tea shop, car wash or supermarket. Help them fill in application forms, take them to the interview and even contact potential employers yourself. Then help them set up their own savings accounts, showing them how their money can grow over time if they leave it there. If you have the money you could even promise to match any savings they accumulate once they get to university.

For more information

To find out more about the Funding Circle ISA visit fundingcircle.com/innovative-finance-isa.

Your actual return may be higher or lower and your capital is at risk. The tax-free entitlement of an ISA depends on your individual circumstances and may change.

The views expressed here belong to the author and do not represent those of Funding Circle. Funding Circle is not authorised to, and does not, provide investment, tax, legal or regulatory advice.

The information and views contained here are provided solely for informational purposes and should not be construed as legal, tax, regulatory, accounting or investment advice, or as a recommendation or an offer or invitation by Funding Circle.

To the extent permitted by law, Funding Circle does not accept any liability for any loss or damage which may arise directly or indirectly from the use of, or reliance on, such information contained here.

If you have any questions, please speak to your professional adviser or seek independent specialist advice.

Saving for a house – by Jasmine Birtles

Jasmine Birtles is a TV and newspaper journalist and personal finance expert. In her new column she’ll be helping you get the most from your investment and reach your personal goals.  

Whether you’re after a home of your own, or you want to help the kids get on the housing ladder, saving for a house can be a daunting prospect. Fortunately there are various things you can do to get the keys to that first home quicker than you thought.

Add to your savings

To get a mortgage you’ll need a deposit and that’s where people struggle. Stay focused and make some sacrifices and you can get there:

  • If your parents are able to have you, you could move in with them temporarily and put aside money you would have spent on rent and bills.
  • Cut your costs including going out, getting takeaways, spending on clothes and the like.
  • Switch all the bills you pay to get the cheapest monthly rate.
  • Check your old direct debits and cut subscriptions including magazines, gyms and unused apps.

Use every scheme going

There are a few Government schemes around specifically aimed at first-time buyers, so make the most of them.

Help to Buy

Help to Buy Shared Ownership works like the schemes run by Housing Associations. You get the chance to buy a share of your home (between 25% and 75% of the value) and then you pay rent on the remaining share. Later on, you could buy bigger shares or the whole lot once you can afford to.

The Help to Buy Equity Loan is a government scheme that helps buyers get a new build property in England. It’s set to run until 2020 and is available to homeowners looking to move as well as first time buyers, but only for new-build homes that are worth under £600,000. It gives an equity loan of up to 20% of the price of the house you want to buy and it means that you personally only need to put down a 5% deposit to get a good mortgage.

The Help to Buy ISA is a savings scheme where the government will top up your savings by 25% (up to £3,000). Your first payment to your ISA can be up to £1,200 and then you can pay up to £200 each month. When you buy your property, your lawyer will apply for the extra 25%. Happily you don’t have to pay it back.

Find out more about all three here.

Starter Home Scheme

In this scheme, 200,000 new build homes will be made available (soon!) to first-time buyers under 40 years old. At least 20% will be taken off the market price, costing no more than £250,000 outside London and £450,000 in London. There’s more here.

Get your parents to help

You’ll probably have had this conversation already, but if your parents or grandparents can help with the deposit it can be invaluable.

However, if they want to help but don’t have the money, they could still be a guarantor for you. There are several ‘guarantor mortgages’ on the market that allow parents, grandparents, or friends to help you buy a property without actually having to hand over any cash at the start. Ask a mortgage broker which lenders offer these.

Try Shared Ownership

…with a housing association

Shared Ownership is usually run by a housing association or council. You own part of a property and pay a small rent on the other part which is owned by the housing association or council.

Competition is high for a place on a housing association list so get in as soon as you can. You can only be on it if your household income is less than £80,000 per year outside of London or less than £90,000 per year inside London. You can find out more here.

…with a friend

Consider doing your own, private ‘shared ownership’ scheme where you buy with a friend or partner. It’s a bit risky but so long as you know that you can get on with the other person, and you have watertight contracts in place, then it can work.

Make extra cash

Aim to make at least an extra £100 a month with a side-earner. You could be  a film extra, do focus groups or babysitting, make cakes to sell, mend computers and more, depending on your skills and time. See the Make Money section on my website, MoneyMagpie.com for more ideas.

The views expressed here belong to the author and do not represent those of Funding Circle. Funding Circle is not authorised to, and does not, provide investment, tax, legal or regulatory advice.

The information and views contained here are provided solely for informational purposes and should not be construed as legal, tax, regulatory, accounting or investment advice, or as a recommendation or an offer or invitation by Funding Circle.

To the extent permitted by law, Funding Circle does not accept any liability for any loss or damage which may arise directly or indirectly from the use of, or reliance on, such information contained here.

If you have any questions, please speak to your professional adviser or seek independent specialist advice.