Saving for pension vs saving for children’s uni fees or property down payment

Anonymous101

A bigger question which I've not seen anyone raise so far is whether going to University is the right decision in the first place.

People seem worryingly ambivalent to the fact students can potentially never repay the loan, this should raise huge red flags as to whether the education is worth the investment in the first place. IMO if you are going to potentially spend £20k pa and lose £15k+pa earnings at the same time there has to be a good pay off at the end of it. This is obviously not the case with a large proportion of University courses.

If there is a guaranteed job at the end of it and they are dead set on going I would take the loan option. Having the cash and helping with either company start up or house deposits would IMO be a better route. The additional "tax", which the loan effectively is, doesn't effect abilities to get loans etc beyond the impact on income so isn't really like other loans.

BuildTheWall

Anonymous101 said:

People seem worryingly ambivalent to the fact students can potentially never repay the loan

These fears have been proved unnecessary as there is no penalty for not repaying the loans. 

fred246

When the fat cat bankers messed up someone had to pay. The young people were an easy target as they were so busy messing with their smartphones that they didn't notice.

BuildTheWall

I read MSE’s article as per Albermarle’s suggestion. Highly recommended reading for anyone with kids. 

Revised my plan - to save minimum £5k per year, in current prices, for every year of higher education. Assuming a max of 6 years of learning, that’s 30k in today’s money to be saved. Probably in one of our ISAs. Rest from student loans - maximise them. In addition start contributing towards their LISA when they turn 18. Hopefully have a decent pot to put down for a house when they are 30. 

pjcox2005

Anonymous101 said:

A bigger question which I've not seen anyone raise so far is whether going to University is the right decision in the first place.

People seem worryingly ambivalent to the fact students can potentially never repay the loan, this should raise huge red flags as to whether the education is worth the investment in the first place. IMO if you are going to potentially spend £20k pa and lose £15k+pa earnings at the same time there has to be a good pay off at the end of it. This is obviously not the case with a large proportion of University courses.

If there is a guaranteed job at the end of it and they are dead set on going I would take the loan option. Having the cash and helping with either company start up or house deposits would IMO be a better route. The additional "tax", which the loan effectively is, doesn't effect abilities to get loans etc beyond the impact on income so isn't really like other loans.

That assumes the benefit of going to uni is just monetary. I went pre high fees and have a good job, but I'd say my education and roles it opened up are secondary to the experience, friendship and fun, and adapting/learning adult skills. Perhaps those later parts are a luxury for those who do need to earn straight away but I wouldn't swap it even if uni doesn't guarantee a well paid job.

On OP question, depends how much money you have. If little to contribute then focus on your pension and ensure you have savings in retirement - it's probably more efficient way of saving, and that's the number on priority as nobody will offer you a "pension" loan like the student loans available.
If you have lots then you could consider splitting to put some away for children in future by just investing in your own name and then having the money there for you to choose how to use it when the time comes.

fred246

pjcox2005 said:

That assumes the benefit of going to uni is just monetary. I went pre high fees and have a good job, but I'd say my education and roles it opened up are secondary to the experience, friendship and fun, and adapting/learning adult skills. Perhaps those later parts are a luxury for those who do need to earn straight away but I wouldn't swap it even if uni doesn't guarantee a well paid job.

Not much fun now is it? Go to strange town far away from home. Sit on your own watching videos of lectures. Sad.

zagfles

Anonymous101 said:

A bigger question which I've not seen anyone raise so far is whether going to University is the right decision in the first place.

People seem worryingly ambivalent to the fact students can potentially never repay the loan, this should raise huge red flags as to whether the education is worth the investment in the first place. IMO if you are going to potentially spend £20k pa and lose £15k+pa earnings at the same time there has to be a good pay off at the end of it. This is obviously not the case with a large proportion of University courses.

If there is a guaranteed job at the end of it and they are dead set on going I would take the loan option. Having the cash and helping with either company start up or house deposits would IMO be a better route. The additional "tax", which the loan effectively is, doesn't effect abilities to get loans etc beyond the impact on income so isn't really like other loans.

Getting much more than a min wage job is hard without a degree these days. You need to be a serious earner to fully repay the loan, according to Martin, with the full loan, even with a starting salary of £50k rising over 30 years to £205k you won't pay it all off.

https://www.moneysavingexpert.com/students/student-loans-tuition-fees-changes/

So yes house deposit etc is a much better way of helping kids. Maybe even increase your pension conts so they get a bigger loan!

Anonymous101

zagfles said:

Getting much more than a min wage job is hard without a degree these days. You need to be a serious earner to fully repay the loan, according to Martin, with the full loan, even with a starting salary of £50k rising over 30 years to £205k you won't pay it all off.

https://www.moneysavingexpert.com/students/student-loans-tuition-fees-changes/

So yes house deposit etc is a much better way of helping kids. Maybe even increase your pension conts so they get a bigger loan!

That is my point really, if you're unlikely to ever pay it off then you need to ask yourself the question of how much is that loan really costing you? Over a lifetime you'll pay much much more than the original capital.
The loans used to be at a low interest rate but I don't think this is the case anymore.

pjcox2005 said:

That assumes the benefit of going to uni is just monetary. I went pre high fees and have a good job, but I'd say my education and roles it opened up are secondary to the experience, friendship and fun, and adapting/learning adult skills. Perhaps those later parts are a luxury for those who do need to earn straight away but I wouldn't swap it even if uni doesn't guarantee a well paid job.

Not necessarily, I do appreciate there is value other than just the financial aspects but I don't think one has to go to university to gain these benefits either. I'm in the same scenario as yourself graduating in 2003 and now work in an unrelated field to my degree earning a good salary. I understand the position students are in these days but think that modern apprenticeships or company sponsored vocational degrees are a much better route to career progression than the traditional route of studying and then trying to find a job.

BuildTheWall said:

Anonymous101 said:

People seem worryingly ambivalent to the fact students can potentially never repay the loan

These fears have been proved unnecessary as there is no penalty for not repaying the loans. 

Except that you're effectively handy capped by an additional tax on earnings above a threshold for the rest of your life. As my point above you'll likely be paying back much much more than the original loan amount. There is therefore a heavy penalty for not paying it back quickly.

BuildTheWall

Except that you're effectively handy capped by an additional tax on earnings above a threshold for the rest of your life. As my point above you'll likely be paying back much much more than the original loan amount. There is therefore a heavy penalty for not paying it back quickly.

1st point - not really. You’ll be paying roughly 2% if you earn 35k and 4% if you earn 50k. That’s fair enough for the opportunities a college education brings. The ecosystem, alumni association, campus recruitments etc - even one additional job opportunity is better than nothing. Also, you can reduce this tax by increasing pension contributions through salary sacrifice. 

2nd point - false. 83% of students don’t pay back their loans, forget the interest. This is as per official statistics- not your made up numbers. Go read the student loan guide on this website before commenting and propagating false information. 

Finally, choosing to get a college education is an individual choice. I won’t force my kids, but I’ll encourage them to get one. It’s easy to talk about apprenticeships in 2003. How many apprenticeships have you seen in 2020? And how many will be successful? For each opportunity today, there are 500 candidates. The minimum requirements for jobs are getting tougher each year. Don’t forget that competition is global. 

zagfles

Anonymous101 said:

zagfles said:

Getting much more than a min wage job is hard without a degree these days. You need to be a serious earner to fully repay the loan, according to Martin, with the full loan, even with a starting salary of £50k rising over 30 years to £205k you won't pay it all off.

https://www.moneysavingexpert.com/students/student-loans-tuition-fees-changes/

So yes house deposit etc is a much better way of helping kids. Maybe even increase your pension conts so they get a bigger loan!

That is my point really, if you're unlikely to ever pay it off then you need to ask yourself the question of how much is that loan really costing you? Over a lifetime you'll pay much much more than the original capital.
The loans used to be at a low interest rate but I don't think this is the case anymore.

Same applies to any long term loan, eg mortgage. But the key differences are you can get better mortgage rates with a bigger deposit, if you lose your job you still have to pay your mortgage, your mortgage needs paying until it's fully paid off.