Martin Lewis warns parents to save eye-watering amount monthly for kids' futures
Money saving guru Martin Lewis has warned parents with young children that there is no time to lose - it's time to start saving for their higher education now.
The Money Saving Expert has named a figure he believes parents should aim to put away each month - if they can possibly afford to do so - to cover university expenses. He says most parents aren’t aware that student finance doesn’t necessarily cover everything, and the government expects those not entitled to the full maintenance loan to be financially supported by their parents.
For parents of five-year-olds with an average wage of £33,000, the aim should be to put away £100 per month for the next 15 years to help cover their child’s university expenses. This amounts to £1,200 per year and an eye-watering £18,000 over the 15 years. Even those with household incomes of £26,000 will be expected to still support their child financially on top of a student loan, Lewis says.
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A June report revealed that for the first time over half of students are in paid employment to help afford living costs during their studies. Maintenance loans have not risen in line with inflation, increasing by just 2 percent this year. Meanwhile, rent in some cities increased by an average of 10 percent.
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Even if your kid has barely started school, it might be time to start thinking about higher education costs (Getty Images)On the Money Saving Expert website a calculator estimates that those with a five-year-old child who ends up doing a three-year degree and living out of home but in London should put £110 aside a month if their family income is £100,000. If the child lives outside London or stays at home, the amount is slightly less - although it is effectively impossible to predict what your child will do in over a decade.
Lewis says middle-income earners are stuck in a “sour spot” as they have to make the same payments as the wealthier - and will be expected to contribute something during their child’s education. Lewis said when asked whether there is sufficient awareness on how the current system works: "Not even close. For a long time there's been a hidden parental contribution. It was never acknowledged."
The guru met six university ministers, who don’t describe it as a parental contribution, the Times reported. "To be fair, Michelle Donelan [science and technology secretary but previously universities minister and education secretary for 36 hours] was the first to say that the language wasn't where we would want it to be,” Lewis said.
Letters sent to parents and students make a “short mention to say parents may need to fund the difference” in maintenance loan. Lewis believes the wording should be more blunt, reading something along the lines of: "Your loan is £6,000, the full loan would be £9,000, the difference is one that you [the parents] have to fund and you are getting less only because of the parental income."
Lewis also sent a warning to those who are paying their student loan back, claiming they might have overpaid by hundreds or thousands of pounds. It is maintenance loans, he reminds parents, which are the more immediate concern than tuition fees - which some say is effectively paid back through a student tax once the graduate is in employment.
He said: "People always ask me, should they save for tuition fees? What people don't realise is, in the main, student tuition fees are an issue for graduates. Living expense loans are an issue for undergraduates. The biggest practical problem that people have at university is having enough money to live off. Loans in England are not going up with inflation. The maintenance loan has gone up by 2 per cent whereas in other parts of the UK it has gone up by 10 per cent.”
As low income families receive the full maintenance loan and wealthy families can afford the extra £5,000 a year difference, it is those on middle-incomes who suffer the most difficult squeeze. Parental contributions begin when family income exceeds £25,000. One large disparity is that those earning £65,000 in a family home are entitled to the minimum loan - the same amount as a family earning £500,000.
"It is never talked about by the state," he said. "Parental contributions are still partially hidden from those on the verge of taking it, never mind those a decade away. The political conversation focuses on tuition fees, not maintenance."
The Department for Education said: "We are supporting universities to help students who are struggling financially by making £276 million in student premium and mental health funding available this academic year, which institutions can use to top up their own hardship schemes."
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