If you have high hopes for your toddler, start saving...
Published 13/08/2015 | 02:30
If you are raising children and expect them to end up going to college, then prepare to be hit with a financial avalanche.
That is the clear message from a comprehensive survey of the cost of third-level education carried out on behalf of the Irish League of Credit Unions.
And it is not as if most students are lazy leeches, depending on mammy and daddy to finance a life of drinking, dating and watching afternoon TV.
Indeed, the opposite is the case.
Most take summer jobs, with seven out of 10 working during term time.
The average student works 26 hours a week getting €11.50 an hour, according to the league's survey.
But that is not enough, and it is the mums and dads of Middle Ireland who are having to take up the financial slack.
The sheer cost of sending a son or daughter to college is enough to require an A in higher level maths to get on top of it.
And it is not as if the difficulty of funding college and university education is cheaper elsewhere.
Britain now has a student-loan system that saddles new graduates with huge debts just as they start their careers, while third-level education has always been hugely expensive in the US.
Here, some parents have savings to support their offspring in higher education.
The average family that has a nest egg to fund a child's third-level education has been putting money aside for eight years, according to the league's research.
But for many there are no savings to call on, after seven years of budget-sapping austerity. This explains why 59pc of parents are forced to borrow money.
That is a truly frightening figure.
Less than half of students get some form of grant. This means that if your family does not expect to benefit from a grant, your best bet is to start saving now.
You would be wise to try and put the child benefit into a savings fund, if you can afford this.
That especially applies if your children are young. The sooner you start saving the better, as time and compound interest will be on your side.
The situation is not helped by the fact that banks are paying miserly interest rates to savers at the moment.
However, if you save the child benefit of €135 a month for 15 years, you could end up with just over €26,000, assuming an interest rate of 1pc, according to Trevor Grant of Dublin-based financial advice firm Cedarhill.
If you invested the monthly child benefit amount in an equity-based fund and it delivered an average net growth rate of 6pc, you could have close to €40,000 after a decade and a half.
However, Mr Grant said this return was not guaranteed and carried the usual caveats in terms of risk.
Whichever of the two options you pick, you will have saved a total of €24,300 over the 15 years.
That would go a long way to funding the college goer in most households.
If you must borrow, then credit unions often have great value on education-type loans. Banks are eager to fund students but will want parental guarantees.
They are prepared to discount loans for students as they know that a student customer will stay with them for life, but are still more expensive than credit unions.