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    • Former MSE Helen
    • By Former MSE Helen 15th Aug 13, 12:32 PM
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    Former MSE Helen
    'Sheer ignorance from financial giant Fidelity on student finance' blog discussion
    • #1
    • 15th Aug 13, 12:32 PM
    'Sheer ignorance from financial giant Fidelity on student finance' blog discussion 15th Aug 13 at 12:32 PM
    This is the discussion to link on the back of Martin's blog. Please read the blog first, as this discussion follows it.





    Please click 'post reply' to discuss below.
Page 1
    • Sparhawke
    • By Sparhawke 15th Aug 13, 1:07 PM
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    Sparhawke
    • #2
    • 15th Aug 13, 1:07 PM
    • #2
    • 15th Aug 13, 1:07 PM
    I read it and cannot say I am not surprised, what they are saying without saying it is that it is better that the money is better in their pockets earning them dividends/interest than in your own and if you do not do it then you do not care about your angels/childrens/spawns future.

    I do not know how much 125 times 12 months over 18 years with compounded interest is but I took a look at a calculator site and at just 1% interest over the term assuming you put in 125 every month you would end up with 29,581.25

    If at the end of that savings period you want to treat your son or daughter to a trip to Ibiza you have a spare 2,981.25

    At higher interest rates you would do even better.

    This is the calculator I used:

    http://www.thecalculatorsite.com/finance/calculators/compoundinterestcalculator.php

    In essence they are saying that you aren't savvy enough to keep your mitts off the money so they will do it for a 3000 charge.
    Last edited by Sparhawke; 15-08-2013 at 1:15 PM.
    "Don't blink. Blink and you're dead. They are fast. Faster than you can believe. Don't turn your back. Don't look away. And don't blink. Good Luck" - The Doctor.
    • JimmyTheWig
    • By JimmyTheWig 15th Aug 13, 3:36 PM
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    JimmyTheWig
    • #3
    • 15th Aug 13, 3:36 PM
    • #3
    • 15th Aug 13, 3:36 PM
    In essence they are saying that you aren't savvy enough to keep your mitts off the money so they will do it for a 3000 charge.
    Originally posted by Sparhawke
    I'm guessing what they are saying is that the money paid in should probably keep up with inflation.
    The cost of university won't be 27k, it will be 27k plus 18 years of inflation.
    Similarly if you pay in 125 a month you won't end up with 27k, you will end up with 27k plus 18 years of growth.

    There aren't many (any?) savings accounts that currently beat inflation, so if they are managing to do this they are at least doing something right.

    [But I agree using this lump sum for university costs with the current scheme would be a terrible idea!]
  • mee
    • #4
    • 15th Aug 13, 3:58 PM
    I think Martin is partly missing the point
    • #4
    • 15th Aug 13, 3:58 PM
    Ok, I get the whole idea of student loans as a graduate tax. Fair enough.

    But there is still an open question Martin is avoiding:

    Supposing I want to protect my child from the effect of this loan, how can I best do it

    This is the real question I have - what sort of saving do I need? I guess this would be in the form of some annuity or lump-sum saving to account for the 9% repayments that my child will incur?

    thoughts?

    -- Mike
    Last edited by mee; 15-08-2013 at 4:06 PM.
    • callum9999
    • By callum9999 15th Aug 13, 4:19 PM
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    callum9999
    • #5
    • 15th Aug 13, 4:19 PM
    • #5
    • 15th Aug 13, 4:19 PM
    Ok, I get the whole idea of student loans as a graduate tax. Fair enough.

    But there is still an open question Martin is avoiding:

    Supposing I want to protect my child from the effect of this loan, how can I best do it

    This is the real question I have - what sort of saving do I need? I guess this would be in the form of some annuity or lump-sum saving to account for the 9% repayments that my child will incur?

    thoughts?

    -- Mike
    Originally posted by mee
    I think the real question is why do you wish to subsidise your future childs income when they are well into adulthood and have a relatively high paying job - surely they can look after themselves?

    If you just want to give them pocket money for the rest of their lives (nothing wrong with that - just unusual) then why does it need to match their student loan contributions?
    • zerog
    • By zerog 15th Aug 13, 4:22 PM
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    zerog
    • #6
    • 15th Aug 13, 4:22 PM
    • #6
    • 15th Aug 13, 4:22 PM
    I guess it's a novel concept in socialist UK for parents to pay for the children's education
  • mee
    • #7
    • 15th Aug 13, 4:40 PM
    • #7
    • 15th Aug 13, 4:40 PM
    I think the real question is why do you wish to subsidise your future childs income when they are well into adulthood and have a relatively high paying job - surely they can look after themselves?

    If you just want to give them pocket money for the rest of their lives (nothing wrong with that - just unusual) then why does it need to match their student loan contributions?
    Originally posted by callum9999

    I guess the impetus would be to incentivise the child to go to uni rather than just find work - by protecting the child from the 9% earnings reduction they would incur.

    Not saying I would definitely do this, but I do think the idea has been glossed over in the loan=tax analogy, and that it merits some discussion
    • JimmyTheWig
    • By JimmyTheWig 15th Aug 13, 4:58 PM
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    JimmyTheWig
    • #8
    • 15th Aug 13, 4:58 PM
    • #8
    • 15th Aug 13, 4:58 PM
    I think the real question is why do you wish to subsidise your future childs income when they are well into adulthood and have a relatively high paying job - surely they can look after themselves?

    If you just want to give them pocket money for the rest of their lives (nothing wrong with that - just unusual) then why does it need to match their student loan contributions?
    Originally posted by callum9999
    I went to university in a time of means-tested grants. We didn't qualify.
    So my parents paid for my university education. (Fair enough, not the fees, but the principle is the same.) So, in many ways, I feel that I should pay for my children's education. Otherwise I somehow end up being the one in the middle who didn't pay, which seems unfair on the generation above and below.
    • JimmyTheWig
    • By JimmyTheWig 15th Aug 13, 4:59 PM
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    JimmyTheWig
    • #9
    • 15th Aug 13, 4:59 PM
    • #9
    • 15th Aug 13, 4:59 PM
    how can I best do it
    Originally posted by mee
    Depends on what you mean by "how"...
  • jamesd
    I think you've over-reacted about this, based on loans rightly being a hot button topic for you.

    The target audience for this Fidelity communication is clearly parents who are going to choose to pay for the university education of their children. If they want to do that, a Junior ISA is one reasonably efficient way to do at least some of it. Of course, it is not necessary for parents to do that and the money will not be the parents to control when it comes to normal university ages.

    Assuming parents did put the money into a Junior ISA, I think that using the pot to pay for university fees would not be a good idea. It's harder to accumulate capital then it is to repay a loan with very friendly repayment terms out of income. In my view it would be better not to spend the pot on fees but instead continue to save it and then use it for a property deposit. Or to use it for a property deposit for a place to live at university, if the parents can assist with the costs of that. May not even be necessary for the parents to pay anything. In some places 27,000 is enough to buy a place outright for cash.

    So I like the saving concept, but not the use of the money for university fees. There are more useful ways to use the money.
    Last edited by jamesd; 16-08-2013 at 3:27 PM.
    • JimmyTheWig
    • By JimmyTheWig 16th Aug 13, 4:15 PM
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    JimmyTheWig
    I think you've over-reacted about this
    ...
    So I like the saving concept, but not the use of the money for university fees. There are more useful ways to use the money.
    Originally posted by jamesd
    Surely that was exactly Martin's point?
  • jamesd
    It seemed to be much more focused on a belief that Fidelity was exploiting misunderstandings about student finance, while I think Fidelity was aiming its promotion more at people who simply choose to pay for university because they can. I think that's a bad idea in a high proportion of cases, just not exploiting ignorance about the loans system.

    Now is a great time to be educating people about how student loans work and why it's likely to be best to use them.
    • MothballsWallet
    • By MothballsWallet 17th Aug 13, 7:43 AM
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    MothballsWallet
    I've never even heard of Fidelity.
    Always ask yourself one question: What would Gibbs do?
    Married to an immigrant.
    If Putin invades, I'm not worried: you, however, should be.
    • Arthurian
    • By Arthurian 21st Aug 13, 10:34 AM
    • 586 Posts
    • 526 Thanks
    Arthurian
    It's all very well saying students shouldn't worry about paying off their student loan because many will never cross the threshold of earning enough. The pressure to repay is there whatever you earn, because you see the debt mounting up with interest charges, year after year, while you are on a low salary and not paying anything back. It's worrying. And at a time when the graduate is thinking of major life changes, such as getting married, starting a family and getting a mortgage, they might think, "Well, how do I know what's going to happen in the next decade? The amount I owe is rising each year with interest. Better pay it off now before I find myself liable to pay and can't."
  • meher
    My inbox has just been dirtied by a terrible press release
    heheh that's how i feel when i see some folks like nigel farage and pat condell enter my living room through the tv
    • John_Pierpoint
    • By John_Pierpoint 28th Aug 13, 12:18 PM
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    John_Pierpoint
    I've never even heard of Fidelity.
    Originally posted by MothballsWallet
    Presumably the UK branch of this mob:
    http://en.wikipedia.org/wiki/Fidelity_Investments
    • Idiophreak
    • By Idiophreak 28th Aug 13, 12:55 PM
    • 11,642 Posts
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    Idiophreak
    To be honest, as a parent, you'd be fairly daft to consider university as the most important thing to save for.

    If you assume, at the moment, some young people will face four big investments before the age of, say, 35:
    University,
    House,
    Wedding,
    Child

    University is the only one of these that they're going to have a (more or less) guaranteed, low-interest loan for...so why would you choose that one to pay for?

    Take the 27k and give it to them as a deposit. They'll be quite happy paying their 9% per month rather than having to save all their spare cash.

    Pay for their wedding, they'll be happier without a loan hanging over their heads.

    Help set them up with baby gear - they can do without a bunch of prams etc on CCs when they're adjusting to life feeding an extra mouth.

    Just my thoughts, anyway
  • LaVerdad
    It's all very well saying students shouldn't worry about paying off their student loan because many will never cross the threshold of earning enough. The pressure to repay is there whatever you earn, because you see the debt mounting up with interest charges, year after year, while you are on a low salary and not paying anything back. It's worrying. And at a time when the graduate is thinking of major life changes, such as getting married, starting a family and getting a mortgage, they might think, "Well, how do I know what's going to happen in the next decade? The amount I owe is rising each year with interest. Better pay it off now before I find myself liable to pay and can't."
    Originally posted by Arthurian
    Yes exactly, to think the government might not change the rules a few years down the line when the deficit isn't reducing enough is incredibly naive. A generation of youngsters owing 50k apiece just screams 'revenue stream' to a politician. I'm fed up of reading advice peddling massive student debt to teenagers on this site - if you aren't going to earn much when you leave you are wasting 3 years at uni, and if you do plan on a successful career, student loans will be crippling to pay back, financially and psychologically. This site should be advising on how to go about studying abroad where fees are not exploitative, or alternatives for uni to those who are not suited.
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