Over three quarters (82 per cent) of parents believe that the recession is making it harder to fund their children through university (up from 73 per cent in 2009), according to the Association of Investment Companies’ (AIC) annual survey into attitudes towards student debt.
With the Coalition Government contemplating reducing funding for universities, the financial strain on students is likely to increase and, with the average student expected to graduate in 2011 with £21,198 of debt, students and their parents really need to make sure that they are financially prepared.
According to the AIC, a £50 a month investment into the average performing Investment Company over the last 18 years would today be worth £20,371 and, over 21 years, it would be worth £28,318, which would definitely be a great help to today's students who are facing such a financial burden.
Once again this year, students are proving more realistic than their parents when it comes to paying off their university debt with 34 per cent of students predicting they will graduate with over £20,000 of debt compared to 19 per cent of parents.
The AIC says a worrying 24 per cent of parents might be in for something of a shock when their child graduates, as they believe their children will graduate with less than £10,000 in debt compared to 19 per cent of students.
Forty nine per cent of students estimate that it will take them over 10 years to pay off their debt and eight per cent believe they could be in debt for over 20 years. With such a debt sentence upon them, some 18 per cent of students said that they would put off or postpone doing postgraduate studies due to the extra debt entailed.
Due to the effects of the recession, fifty five per cent of students are worried they will not be able to find a job on graduation.
With the worry of debt levels on graduation, some 32 per cent of students have said that they would look for a higher paid job over their career vocation to help pay off their student debt and, of the 27 per cent of graduates who would consider taking a gap year before university, 11 per cent would do so in order to help their financial situation on graduation and 9 per cent would do so to put less of the strain on family finances.
A quarter of parents questioned said they would be the main source of funding for their child's university education and 12 per cent said that grandparents would be making some contribution as well. Just under half (46 per cent) of students will be taking out a student loan as their main source of income.
Parents are still prepared to make financial sacrifices for their children to help them through university. Twenty three per cent of parents questioned said they would sacrifice their annual holiday, 21 per cent said they would forgo a new car, 13 per cent said home improvements or extensions could wait, 13 per cent would postpone retirement and 12 per cent would remain in their existing house rather than moving to a bigger one.
"Clearly the recession has made it even harder for parents to fund their children's university education,” said Annabel Brodie-Smith, Communications Director, AIC.
“It is worrying that so many students and their parents are still underestimating the true cost of going to university. Many young people go to university to enjoy some of the best years of their life but the reality on graduation is a huge financial burden that will take years to pay off.
"With parents facing an ever increasing financial burden, if you can start saving for your children for the long-term from an early age you can give them a financial advantage in life. The sooner you start investing for your children, the better chance of greater returns.
“Investment companies offer parents a useful way of saving as they can access the long term potential of the stock market.
“Investment companies invest in a variety of companies on your behalf, spreading your investment risk and they are available from as little as £50 a month, or £250 lump sum. If you had invested £50 a month in the average investment company over the last 18 years you would now have over £20,000."
Investment company performance figures
£50 per month regular saving versus lump sum equivalent to 30 June 2010 in average Investment Company:
|
Duration
|
1 year
|
5 years
|
10 years
|
18 years
|
21 years
|
|
£50 Regular Savings
|
|
|
|
|
|
|
Sum Invested
|
£600
|
£3,000
|
£6,000
|
£10,800
|
£12,600
|
|
Average Investment Company
(share price total return)
|
£613
|
£3,199
|
£8,323
|
£20,371
|
£28,318
|
|
Lump Sum Equivalent of Regular Savings
|
|
|
|
|
|
|
Sum Invested
|
£600
|
£3,000
|
£6,000
|
£10,800
|
£12,600
|
|
Average Investment Company
(Share price total return)
|
£726
|
£3,842
|
£8,704
|
£49,280
|
£61,506
|
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