Financing your Childrens Education in an Age of Declining Financial Aid

Parents have a natural and deep-rooted desire to ensure that their kids’ needs are catered for, and that extends to making sure that their education is adequately funded. The thought of them going to university may seem a long way away but, with tertiary educational funding declining and the cost of study rising, the actions that you take now may be vital to ensure that your children are provided for and don’t end up saddled with debt.

Let’s look then at the options that are open to parents to fund their child’s future education:

Savings account:

Set up a savings plan for your child when it is born, and put a regular amount into it each month. With the benefit of compounding of interest, you should generate a large pot of money by the time your kid is 18 and ready to go to 3rd level education.

For example, if I were to pay just $100 per month into a high interest savings account (at c. 4%), for 18 years, the end balance would be over $30,000.

Whether or not your child ends up going to university that would give them a healthy financial start to their adult life.

Tax free and high interest:

When opening a savings account, make sure that you maximize any tax free entitlements. For example, in the UK, individuals can open an Individual Savings Account (ISA) and invest up to 5,100 pounds per year without paying interest on the returns. It goes without saying, also, that you should ensure that you choose an account that offers a good interest rate.

Government funding:

Bringing a child up is an expensive business so it’s important to take advantage of any government support that is on offer. The support provided will vary depending on where you live but it’s worth doing some research to see whether you are eligible to receive any money.

For example, in the UK all parents qualify for the Child Saving Fund. An initial payment of 250 pounds is awarded prior to the birth of the child. This money goes into an account that belongs to the child (rather than the parent) but the child can’t access the money until they are 18. The parents can then additionally invest up to 1,200 pounds per year into the fund, and the government will make a further contribution when the child reaches the age of seven. That additional payment will be for 250 pounds, although an extra 250 pounds will be awarded for lower income families.


Rather than focusing entirely on savings account, parents can also consider the option of investing money in shares, or in a combination of savings and shares. The key here is that the earlier you start thinking about your child’s future financial needs, the easier it will be to generate a large pot of money.

Preparing your child to manage money well:

There’s no escaping the fact that college is an expensive business and it may be daunting to have to face up to the task of financing your kid’s education, especially if you have more than one budding academic! However, on top of the core costs of tuition fees, books, and accommodation, students often run up significant debts through living a lavish lifestyle and not understanding how to manage their money and new-found freedom.

It’s vital therefore that you educate your children in the importance of money and how to manage it responsibly. If your child goes to college without understanding what budgeting is or the importance of sticking to an agreed overdraft limit, then you only have yourself to blame if you subsequently have to bail them out when they’ve run up huge debt and bank fees.