Parents need to save £82 each month to cover tuition fee costs
Parents need to save up to £82 each month starting from the birth of their child if they are to cover the cost of the new university tuition fees cap, according to analysis by Family Investments, a leading children's savings provider.
This figure rises significantly to £129 if parents delay saving until their child is aged five.
With university fees set to rise to as much as £9,000 per year of study, parents could need to save as much as £27,000 if they plan to cover the cost of a child's higher education for a three year undergraduate degree. These figures are calculated using tuition fees alone and do not take into account the cost of living or any future increases to the cost of fees.
Family's experience is that parents are currently not saving enough to cover the increased fees. The average direct debit into a Child Trust Fund is currently £24 per month which could provide around £8,000 after 18 years if invested in a stocks and shares-based account. While this would provide a significant proportion of the current cost of tuition fees, monthly payments would have to increase by 240% to achieve the new fees cap - something which is likely to be beyond increasingly hard pressed families.
But parents shouldn't be put off, the good news is that those with newborn children have an opportunity to start saving early, putting aside little and often into the right type of account can still build up a sum that will be a great help for their children when they are ready to start university.
Kate Moore, Head of Savings and Investments at Family Investments said: "As more universities are expected to charge the maximum tuition fees from 2012, parents are under increasing pressure to make important decisions about saving for their child's future earlier than ever. For many, these fee increases will have caught them unaware. In Britain, the US style college savings fund has never caught on, but now it looks set to become a necessity.
"Most parents are looking for simple products that will provide a significant return over the long-term, but they are understandably cautious about risk when saving for their children. It is important to take a long-term approach to saving for your child and accept the fact that there will be ups and downs along the way.
"Since their launch in 2005 the average stocks and shares Child Trust Fund has returned 5.5% per year despite the recession, whereas the average instant access child savings account currently pays an average of just 1.18%.
"When it comes to creating a savings pot for the amounts needed to cover tuition fees of up to £9,000 a year, it really is the case that the sooner they start the higher the chances are that they will reach their goal. Parents who delay saving will face an uphill struggle as it becomes difficult to chase a total.
"The Government's new Junior ISA product is expected to launch in the autumn which will provide a further boost to the required savings culture, and it can't come soon enough for parents. We urge both product providers and the Government to get behind the Junior ISA and help shape a product that is easy to understand and accessible to families of all incomes. It is now more important than ever to ensure that the gap left behind by the removal of the Child Trust Fund is filled as soon as possible"