# How much do I need to save for my kids' third level education?



## 44brendan (10 Feb 2015)

How much money do you need to set aside to provide for children's 3rd level education? Up until the last couple of years I was under the illusion that my meager savings supplemented by spending cutbacks would adequately provide for the educational costs of 2 offspring. Unfortunately I discovered to my cost that I was well under budget with my calculations. Here is a rough guide to my own experience. Any supplementary information welcome!

Student Contribution from 2015 - €3,000
House share rent                      - €3,600 (taken at €400pm over 9 months)
Travel/food expenses                - €2,560 ( taken at €80pw over 32 weeks)
Total Annual cost                      - €9,160 ( X4 years = €36,640

Figures assume a very modest rent (sharing X 6 in case above). Also assume living outside main University City (Alternative may be to provide a car!!!). Plus student prepared to work week-ends for pocket money etc! Does not take account of fact that 1st graduate now needs to go for 2 extra years to complete a Masters. This is after tax income so at 52% take out the gross amount needed annually would be close to €20k!!


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## Brendan Burgess (13 Feb 2015)

Hi brendan 

I think you are looking at it the wrong way. 

5 years of third level education is an investment, rather than an annual cost. You recognise this in that you save up for it.  But it's wrong to think of it as requiring €20k of gross income per year.  It probably does require about €50k in total, but this can be saved over a number of years, or borrowed at the time, and paid back by you or by them afterwards. 

I think that big expenditure like this should be treated the same way as other big expenditure e.g. buying a house, paying for a wedding, or paying for retirement. You should save for the lot together.  For example, rather than save up separately for this, pay down your mortgage as quickly as possible and remortgage when you need the money. 

Brendan


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## Steven Barrett (13 Feb 2015)

44brendan said:


> House share rent - €3,600 (taken at €400pm over 9 months)



You'll find that landlords will insist on a 12 month lease too. 

I think most can include college fees of €5,000 +. There is no way this "free college" will be continued, it's just not affordable.

If you put a savings plan in place for €150 - €200 a month from when the kids are young, you can easily meet the costs. Taking it out of current cashflows is a bad idea and will only impinge on your lifestyle. 

Steven
www.bluewaterfp.ie


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## Bronte (13 Feb 2015)

There is a saving surely to not having them at home.  Heating, ferrying, pocket money. I do advise you to teach them some very basic cooking skills as this is very important.  So that they are self sufficient.  And I'm not going to be trusting mine with handing out large amounts of cash.  Delivery of real food, ie mince, tins of tomatoes, pasta, eggs etc would be the way to go. 

You apparently have some savings.  You need 10K annually it seems.  Let's say you have 5K of that saved, then you need 5K each year (or 10K of salary before tax). To my mind that makes it a lot easier to deal with.  Of course it gets worse when you've two in college at the same time.  Unless you've them well spaced out !

Whatever about weekend jobs, time for the UK/Europe and the USA for their working holidays.


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## Steven Barrett (13 Feb 2015)

Bronte said:


> And I'm not going to be trusting mine with handing out large amounts of cash.



There were fees for my first year of college. My dad was able to do a covenant and claim the tax back on the fees. It did mean, however, that a large sum of money was lodged into my bank account and had to stay there for a number of months. I did give in to temptation a couple of times but knew I would be working full time over the Christmas as well as cash I would be getting from Santa  and could pay it back easily. 

Not so much for another guy in my class who spent the lot! Asking a poor student to mind a large sum of money is never a good idea!!!


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## Bronte (13 Feb 2015)

A friend of my bother's spend his grant money in a week, every time.  My BIL spent his grant likewise and spent the rest of the term in his rented accommodation.  My sister became practically anorexic as all they did was go out and not eat.  etc etc etc. 

We can't control them or prevent them, but we can make sure they at least get decent food.


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## Sandals (13 Feb 2015)

Sibling saved money on her grant..another sibling got scholarship douth costing anything either as spent loads on xms presents last two yrs...


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## michaelm (13 Feb 2015)

Brendan Burgess said:


> For example, rather than save up separately for this, pay down your mortgage as quickly as possible and remortgage when you need the money.


That sounds trappy to me.  Getting any loan, never mind a mortgage, can be tricky and should not be taken for granted.  Just save up.


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## 44brendan (13 Feb 2015)

Brendan Burgess said:


> I think that big expenditure like this should be treated the same way as other big expenditure e.g. buying a house, paying for a wedding, or paying for retirement. You should save for the lot together. For example, rather than save up separately for this, pay down your mortgage as quickly as possible and remortgage when you need the money.


Fair comment! Did all that for the 1st offspring but got carried away in the boom period and used the savings to do up the PDH, thinking that my annual income would keep rising. The days are long gone when you could get a mortgage top up to cover this expense (perhaps correctly!!). Fees increases are also going to be an ongoing problem. I really think we should be looking at a system where the student can borrow and repayments will commence with pay cheques! Admittedly we have a long way to go yet to reach the Fee levels in the US!


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## michaelm (13 Feb 2015)

Do you not qualify for any relief under student grant and postgrad grant schemes?


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## Steven Barrett (14 Feb 2015)

Brendan Burgess said:


> rather than save up separately for this, pay down your mortgage as quickly as possible and remortgage when you need the money.



The banks won't allow you to remortgage unless it's for home improvements.

Even if you could, is it the best route to take? A lot of time, effort and cost to remortgage all the time. Then you are committing all your spare cash to something you cannot access. What if you pay down mortgage and then get refused a remortgage? 

Steven
www.bluewaterfp.ie


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## trasneoir (18 Feb 2015)

Thanks for sharing the numbers OP. Is this Dublin? If so, I'm pleasantly surprised at the price of accommodation.



Brendan Burgess said:


> rather than save up separately for this, pay down your mortgage as quickly as possible and remortgage when you need the money.


While this make mathematical sense, I prefer SBarrett's approach for psychological reason:


SBarrett said:


> If you put a savings plan in place for €150 - €200 a month from when the kids are young, you can easily meet the costs.


I think for most households a small monthly college saving could help keep minds focused, lifestyles under control, and set a good example for the children. Getting the kids out of college should be the financial home stretch, not the start of a new debt headache.




Bronte said:


> And I'm not going to be trusting mine with handing out large amounts of cash.  Delivery of real food, ie mince, tins of tomatoes, pasta, eggs etc would be the way to go.


IF kids haven't learned to handle money by college age (I sure hadn't), allowing them to experience a financial/dietary setback or two might be no bad thing.

Let them have a monthly allowance for living expenses. Let them learn that they hate three weeks of porridge and koka noodles more than they love a weekend coke and hookers.


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## Brendan Burgess (18 Feb 2015)

michaelm said:


> That sounds trappy to me. Getting any loan, never mind a mortgage, can be tricky and should not be taken for granted.





SBarrett said:


> The banks won't allow you to remortgage unless it's for home improvements.
> 
> Even if you could, is it the best route to take? A lot of time, effort and cost to remortgage all the time. Then you are committing all your spare cash to something you cannot access. What if you pay down mortgage and then get refused a remortgage?



Fair comments. I am probably thinking of the time when lenders used to hand out mortgages much more easily.

But the overall point is valid though. By far the best risk-free, tax-free return on your money is paying down your mortgage.  

If you have very young kids, then overpay your mortgage, but leave the term the same. A few years before they are due to start college, reduce your payments to the minimum. You will then be saving a large amount every month which should be enough.

And many people will move home and remortgage before their kids start college. At that stage, they can keep some of their equity aside. 

The overall problem with the system is that we need to take an integrated approach to mortgages, pensions and savings. It makes no sense to have taxable savings and investments while having expensive borrowings at the same time. It would be great if a lender offered a life cycle product.  Pay down your mortgage now and when you need it we will give it back to you.

Brendan


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## Slim (18 Feb 2015)

OP - your figures are pretty spot on, in my experience. We allow junior €60 pw for food, but occasionally a bill comes in for gas or electric. Also, monthly rent is €360. How this is funded is different for everyone. We are lucky, we have savings and the SSIAs went towards the 3 kids' education. No grants.

Incidentally, a large Irish Bank is offering up to €10,000 loan, interest free, to students for a period of 5 years, no repayments! We are getting one but I am guarantor. Junior will NOT be controlling that money!


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## Steven Barrett (18 Feb 2015)

Brendan Burgess said:


> But the overall point is valid though. By far the *best risk-free, tax-free return* on your money is paying down your mortgage.



You're still giving up cashflow Brendan. Most people are willing to make that trade off to ensure that they know there is money available if they need it. 

Steven
www.bluewaterfp.ie


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## 44brendan (18 Feb 2015)

Brendan Burgess said:


> If you have very young kids, then overpay your mortgage, but leave the term the same. A few years before they are due to start college, reduce your payments to the minimum. You will then be saving a large amount every month which should be enough.


Sounds reasonable in theory Brendan. However, no bank is equipped to deal with this in practice. If you overpay your mortgage, what will happen in practice is that the system will reduce your future payments in accordance with the existing rate and remaining term. The DD system is not really geared for this type of payment practice.


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## 44brendan (18 Feb 2015)

Slim said:


> Incidentally, a large Irish Bank is offering up to €10,000 loan, interest free, to students for a period of 5 years, no repayments! We are getting one but I am guarantor. Junior will NOT be controlling that money!


BoI are now offering a 7,500 loan to students for masters completion. Absolutely great as its a 5 year loan facility with repayments commencing after 2 years. I.e. repaid over 3 years. In theory the "student" should be commencing to earn at that stage. In practice its unlikely, but at least it postpones a major expense until after the college is completed and hopefully ancillary expenses will have ceased!!


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## Orbit (18 Feb 2015)

Assuming I manage to save enough to give my child €10 K per annum for a 3rd level coarse.
Is there any tax implications for me giving my child this money ?
Is there any tax implications for my child receiving this money ?


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## 44brendan (18 Feb 2015)

No! Educational expenses for children are excluded from AT. I think it's up to age 25!


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## demoivre (19 Feb 2015)

How long is a piece of string ? We have two in college in Dublin . We had budgeted for €12k per year each but am coming in at less than that, probably around the €20k mark this year all in for the two of them ie fees, accommodation, travel and spending money. One daughter is in UCD the other in  St Pats ( not the young offenders institution !) UCD will come in around the €10k or €11k and Pats at about €9k.


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## 44brendan (19 Feb 2015)

Major savings are achieved when student can live "at home" and commute daily to college!


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## demoivre (19 Feb 2015)

44brendan said:


> Major savings are achieved when student can live "at home" and commute daily to college!



Indeed and is to be encouraged where possible. Also big variation between total costs depending on where you live in Dublin, use of public transport, food brought  back on Sundays etc.  I know someone forking out €15k per year, all in, for 1 kid in UCD - that's 50% more than I'm paying and my daughter is not slumming it !


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