Students starting uni this year can expect annual costs of £20,000

The annual living cost of being a student will reach £11,000 for those starting university this year, according to analysis by Family Investments, a leading children's saving provider. The increase is equivalent to a rise of 7% as annual living costs increase from £10,186 twelve months ago to £10,929 today - an increase of  £743.

On a monthly basis students have seen their living costs increase from £848 in 2011 to £910 today. This increase does not include the new university tuition fees which take effect from September and will add a significant strain - up to £9,000 annually - to student finances. In total, students could find their time at university costs them as much as £20,000 per year, which is clearly out of the reach for many parents to fully fund, particularly for 3 or 4 consecutive years. 

Rent is the biggest single living expense with the average student currently spending £165 a month on accommodation, up from £159 a year ago, that's around 18% of monthly outgoings.  Transport costs have increased 17% from £71 twelve months ago to £78 per month today and with the expected hike in train fares announced this week these costs could rise even further. 

In 2004, when figures on student living costs became available, the monthly cost of living was £561, since then students have seen living costs rise by 62%, an annual increase of almost 9% a year. Food costs have seen the greatest inflation with expenditure rising 77% since 2004 rising from £44 to £78 a month. 

The issue of tuition fees dominates current discussion of student finances but this is only part of the picture as rapidly rising general living expenses are also having a big impact on the affordability of a university education. If the cost of living continues to increase at current rates, those students starting a degree in 2012 may see annual costs hit £13,159 by the time they graduate in 2015. The increase of £2,230 compared against today's costs, would be a significant addition in its own right and students will be hoping that falling inflation rates eventually filter down into their living costs.

Kate Moore, Head of Savings and Investments at Family Investments said: "Figures reported last week indicated there were 15,000 fewer university applications for places starting this year. The impact of significantly increased tuition fees is clearly being felt and is acting as a disincentive for many who would otherwise apply.

"For those A level students hoping to attend university, the wait is over and they will now know if they have achieved the necessary grades. For many parents, the big question is how to finance such a cost at a time when they need to take into account not just tuition fees but very significant living costs too. With inflation creeping down towards target, students and parents alike will be hoping that this eventually filters down to their living costs.

"Of course, the huge increase in tuition fees will have taken many by surprise and left little time to save towards the cost. Taking a long-term view however, it would seem that these fees are here to stay so a shift in the savings culture in the UK would help parents prepare for the future, similar to the college fund savings culture of the US. Spreading this saving over an eighteen year period can significantly reduce the financial burden.

"One of the best ways to start saving early is through the Junior ISA, a new tax efficient savings account for children launched last year. Family Investments offer a Junior ISA that allows parents to save from as little as £10 per month. However, awareness of this product is fairly low amongst parents so we are urging the government to get the message out that it's good to save from an early age and that Junior ISAs are an ideal way to do this.

"Family Investments research shows that parents need to be saving around the equivalent of their child benefit each month in order to cover student living costs through university. Smaller contributions will however go a long way, particularly if parents start at an early stage and allow for the potential impacts of compound interest or stock market growth."