University savings account

trigger29

My son is due to start Uni in September. As we all know, they get saddled with almost £4K per annum tuition fees. I don't want my son leaving Uni with a large debt but I cannot afford to pay all the sum off every year. My idea is to start a savings fund. I can afford £100 per month and his grandparents want to put a lump sum in every year - around £1000. My questions therefore are:
1. Are the savings best in his name as he would not be a tax payer?
2. What would be the best sort of savings route to follow? I doubt whther the money would be touched over the three years of his course but there may be extra curricular trips etc to pay for so would need to when thinking abo0ut this?
3. Is this a good idea or does the forum have experience of better avenues to explore?
All advice greatly recieved.

jennifernil

I set up a monthly savings account to pay our daughter's university costs off at the end of her course. Mine was a 5 year account in my name as I am not a taxpayer.

Are tuition fees loans not interest free till the student graduates? Not really sure on that.

Anyway, you could do something similar but have the account in your son's name to be tax free. (As long as he does not have any earnings that will take him into tax)

A regular (monthly) saver cannot normally have any withdrawals, but this may be a good thing to save him from frittering the money away. There are lots of different ones, so you will need to do some research.

Grandparents could contribute monthly too, but if they want to give a lump sum annually then you will need to find a second account. A fixed 1 year account would be one suggestion. Roll it over into a new one and add the extra £1000 each year. You could consider ISAs too.

agal

jennifernil wrote: »

Are tuition fees loans not interest free till the student graduates? Not really sure on that.

I believe the student loans begin to accrue interest from the day they are paid.

trigger29

Thanks for the replies but I was looking for the best savings options really. As I mentioned, the money would probably not be touched unless theres an expensive field trip or something. Therefore, is it best for a fixed account, an ISA or something else. I am looking at the best return I can get in reality.

Thanks

jennifernil

Accounts change regularly so you need to look at what is the best available at the time when you want to start saving.

At the moment, for example, Principality have a 1 year Regular Saver Bond Issue 10 that pays 4% fixed. You need to deposit between £20 and £500 per month, not miss any payments, no withdrawals allowed. There are plenty of other accounts/options, look at

https://forums.moneysavingexpert.com/discussion/608697

With the grandparents £1000 open a fixed rate account (some allow withdrawals, some don't), fix for 1 year.
Check on here under "Banking and Saving" for best deals.

At the end of the year you start a new account, roll over the £1000 plus interest and the Regular Saver money into it, plus the Grandparents next £1000. You then start a new regular Saver. If the fees loan is to be paid off every year then the saved money could go towards that rather than accumulating.

If your son is definitely not going to be a tax payer then there is no benefit in having the money in an ISA, especially as ISA rates can often be lower than other accounts.

If you want the money in your name then an ISA could make sense. You need to do ypour homework on that.

sciencegeek

jennifernil wrote: »

If your son is definitely not going to be a tax payer then there is no benefit in having the money in an ISA, especially as ISA rates can often be lower than other accounts.

I disagree, if you manage to put £2200 (£1000 lump sum + 12x£100) into an isa each year then at the end of the course he will have £6600 + interest that can remain in the tax free isa.

Assuming he gets a job and becomes a taxpayer this will have a benefit. By shopping around you can find decent ISA rates.

Student loans can be still paid off slowly with no major impact on your take home earnings but you will know there is that tidy lump sum earning you tax free interest for as long as you care to keep it there.

Lokolo

On top of the above advice. He should have a budget plan. I assume he knows how much maintenance loan and maybe some grant he will be getting?

He should know accommodation prices?

Depending on the uni, the maintenance money he gets will either cover his housing, or it won't. It would be worthwhile preparing!

jennifernil

sciencegeek wrote: »

I disagree, if you manage to put £2200 (£1000 lump sum + 12x£100) into an isa each year then at the end of the course he will have £6600 + interest that can remain in the tax free isa.

Assuming he gets a job and becomes a taxpayer this will have a benefit. By shopping around you can find decent ISA rates.

Student loans can be still paid off slowly with no major impact on your take home earnings but you will know there is that tidy lump sum earning you tax free interest for as long as you care to keep it there.

This is of course correct, but it is not what the OP stated her plan to be.

There are several options here. She and the Grandparents could also just give the money directly to the student every month/year, and let him handle his own budget/spending/debts.

trigger29

All sound advice, thanks for all the replies. He will be living at home so thats a little cheaper on him and the purse strings.
May plump for the ISA option then but I'll have a trawl around like jennifernil advised earlier.
Bit disgusting students get saddled with huge debt before they even have the means to repay. Doesn't give them the best start on lifes ladder but I guess thats another thread at another time. Dont get me started!!!:mad:
Anyone else free to add anything but as I said thanks for the advice.

7891368

If he's living at home have you checked for any additional bursary he may recieve for staying to studying in the area he lives. Or anything extra he can claim for at all!

jennifernil

A part time job will help boost his income, and living at home will save a lot, unless he has a lot of travelling expenses.

Before you decide on an ISA or not, I think you need to look into how the money will be used. Will he want to use it to pay off debts, or will he want to keep it towards getting his own place/buying a car/etc/etc .......

With the max ISA allowance now £5100 per annum, the £2200 + interest saved each year could possibly be in better paying non ISA accounts initially to see how things go, then after 2 years he would still be able to put it all into an ISA it that is the decision.

If he has a part time job and works in the vacations, he could well be into paying tax, so there are quite a few calculations to make.

Good luck!