Whether it’s university fees or the wider expenses of helping a child or grandchild through higher education, many families need to think carefully about how best to financially support future generations. Education can be one of the most meaningful gifts a family can bestow, but without a clear plan, it can also put huge strain on your own long-term financial security.
There are several ways families can help, from regular saving while children are young to structured gifts from grandparents later on. The right approach will depend on your circumstances, the child’s age, the amount of support needed and when it will be needed.
A good starting point is to build an accurate picture of the potential cost. It’s important to look beyond tuition fees, which for universities can reach £9,535 a year in England and Wales, and factor in other costs such as accommodation, travel and course materials. This can help you decide how much can be funded from your income, how much needs to be saved in advance and where wider family support may be needed.
For parents, saving early into suitable accounts, such as Junior ISAs or investment accounts, can help spread the cost over time and allows the family to adapt if circumstances change. However, education funding should not be viewed in isolation. In addition to making sure you have sufficient ‘emergency reserves, there are other financial priorities such as pension saving, retirement income and estate planning.
Grandparents often want to help, and their support can be crucial. However, gifts towards education must be structured carefully. Inheritance Tax (IHT) may apply to some gifts made within seven years of death, although exemptions can help.
Each individual can usually give away up to £3,000 per tax year using their annual gift exemption, with the ability to carry forward unused exemption for one tax year. Regular gifts from surplus income can also be effective where they are affordable, made from income rather than capital and do not affect the giver’s normal standard of living.
Some families may also consider a grandparent trust where larger sums are involved. A bare trust allows assets to be held for a child until they are aged 18 with early withdrawals possible if it’s to the benefit of the child. However, trusts are complex, so advice is important before taking this route.
The message is simple: generosity works best when it is planned. The right approach can really help children and grandchildren financially as they continue their education, while giving parents and grandparents confidence that they are not weakening their own financial position. If you have children or grandchildren that you want to help through higher education, speak to your Origen adviser to see how this can fit into your wider financial plans.
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