Annabel Brodie-Smith blog: The serious business of being a student

Recently it seems the fecklessness of youth is on borrowed time and it has now become an altogether more serious business.  On Thursday the media will have lots of pictures of teenagers celebrating their A level results before heading off to university in October. But on graduation young people currently have an average student debt of £44,000 according to the Institute for Fiscal Studies,* a sobering number.

Our recent student debt research shows that both students and parents underestimated likely student debt on graduation, although students were more realistic, estimating around £30,000, whereas parents estimated £23,000. The research also showed that parents were willing to go to great lengths to see their children through university.  Two thirds of parents were willing to use some of their cash savings, and alarmingly a fifth were prepared to use all or most of their cash savings.  One in ten were even willing to take out a bank loan in their own name to help fund their child’s university costs. And it’s not just parents; a fifth of grandparents are contributing or plan to contribute to university costs.

It’s hardly surprising with such large numbers involved that more young people are considering not going to university at all. Such large numbers can seem daunting, but if you can save a bit each month over the long-term, they start to look more manageable.  For example, if you could have spared £50 a month over the past 18 years (a total of £10,800) and invested in the average investment company, you’d now have over £27,000. Some careful planning would help you ease the burden of university costs but of course, if you have any doubts, you should take independent financial advice.

Investment companies give investors access to the long-term potential of the stock market, and are worth considering given their strong long-term performance. If you’d been able to put a lump sum of £1,000 into the average investment company 18 years ago, you’d now have £4,030, more than quadrupling your money. Clearly if you can make such a good start to saving towards university costs, these figures don’t sound so scary. Some investment company providers have very low minimum monthly investments from as little as £25 a month, so even with a small budget you can make the most of your savings.

Having looked at the issue of student debt I will be checking myself before I dole out any of those all too tempting clichés to my own children about not knowing they are born.  Or so I like to think, at any rate!

*Source: Institute of Fiscal Studies, April 2014
**Research conducted by Opinium between 8-16 June 2016

Annabel Brodie-Smith is the Communications Director at the AIC