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

JoeCrystal

westv said:

The problem with "loan" is that it puts into people's heads something that should be paid off ASAP even if that is pointless for most.

That is that I did when I paid off my student loans in full as early as possible. Wish I haven't done that, to be honest.

zagfles

fred246 said:

Take 2 scenarios. Assume dad has £102K. Student has £50K job and buys a house for £250K
1.Dad uses £37K to pay student fees and gives £40K to his daughter for living expenses and £25K for a house deposit. When she graduates she needs a £225K mortgage costing £1095 a month according to Nationwide. She pays no monthly loan repayment.
2.Dad is well paid so takes maximum student loan which pays tuition fees and £4289 living costs so dad pays £5711 x 4 = £22844 living costs. He gives his daughter £79156 for her house deposit. She pays £690 a month on her mortgage. She pays £175 a month student loan repayment.
So scenario 2 saves £405-£175=£230 a month.

Or even better, scenario 3. Dad uses some of the £102k to increase his pension contributions for a couple of years to reduce his income as assessed by SFE to £25k. Daughter then gets the full loan plus bursaries providing well over £10k pa, so no top up from Dad needed while at uni. Dad then uses the remaining money plus possibly tax free cash from the pension to give daughter a £102k deposit.

Much more complicated and depends on circumstances, age, existing pension etc.

kinger101

On thing worth remembering is that we don't necessarily know what the student loan system will be in the future.  At the moment, it would most likely be better they used money for house deposit once they've started their career rather than using it to cover education.  But the situation might be very different by the time your children reach 18.

I'd also say saving something towards your kids future is a nice optional, but it's likely to be much less tax efficient that saving into your own pension.  For those who have started a family later in life, their retirement age might coincide with their children wanting to get on the property ladder.

Personally, I'm putting a modest amount into a JISA, but main focus is pension.

Alexland

Yes no idea what the student loan system will be when our little ones are old enough so have earmarked £100k of our S&S ISAs for uni and the £50k in our LISAs for their house deposits. With 2% growth above inflation that should be enough for a 3 year course and 15% deposit for each of them.
We are still contributing enough into our pensions to be tax efficient and I would prefer they took out loans so we could retire earlier with our S&S ISAs and repay them at some point when we get access to pensions and LISAs which will have grown further with more contributions. We earned enough to fully repay our student loans (mine completed over a decade ago) so I would hope their debt being written off is unikely but will take a view after they start work. We probably won't just give them the house deposits but offer a generous saving matching system depending on their circumstances.

Albermarle

Also you never know quite what they will be like when they get to Uni age . Maybe they prefer to do something else , like go and live with an unsuitable boy or girlfriend and fail all their A levels ( or not even take them ) and not talk to their parents ( not my personal experience !) Or as the son of one friend did - go to Russel group Uni , drop out after a year and now happily packing boxes in an Amazon warehouse.
Life can be unpredictable .

zagfles

Alexland said:

Yes no idea what the student loan system will be when our little ones are old enough so have earmarked £100k of our S&S ISAs for uni and the £50k in our LISAs for their house deposits. With 2% growth above inflation that should be enough for a 3 year course and 15% deposit for each of them.
We are still contributing enough into our pensions to be tax efficient and I would prefer they took out loans so we could retire earlier with our S&S ISAs and repay them at some point when we get access to pensions and LISAs which will have grown further with more contributions. We earned enough to fully repay our student loans (mine completed over a decade ago) so I would hope their debt being written off is unikely but will take a view after they start work. We probably won't just give them the house deposits but offer a generous saving matching system depending on their circumstances.

The system's changed massively since then, higher tuition fees, higher maintenance loans, higher interest, higher threshold for repayments, all of which means that you need to be earning serious money to repay the lot. As above, even a starting salary of £50k rising to £200k 30 years later wouldn't do it.

zagfles

Albermarle said:

Also you never know quite what they will be like when they get to Uni age . Maybe they prefer to do something else , like go and live with an unsuitable boy or girlfriend and fail all their A levels ( or not even take them ) and not talk to their parents ( not my personal experience !) Or as the son of one friend did - go to Russel group Uni , drop out after a year and now happily packing boxes in an Amazon warehouse.
Life can be unpredictable .

Indeed - I know someone like that, although he actually got a good degree, but wasn't interested at all in the rat race, happy with min wage no pressure jobs. Partner the same. Earn about £35k between them, easily enough for a decent simple lifestyle, no interest in having kids, no interest in flash cars, big houses, posh holidays or anything like that. They are really happy. And unlikely he'll pay back a penny of his loan.