Students off to university are relying heavily upon parents and grandparents to fund their education, says the Association of Investment Companies.
Figures from the AIC show 71% of parents contribute financially to help their children through university, or plan to. The average contribution is £8,723 a year, with more affluent parents contributing £9,626 on average, and less affluent parents chipping in £5,639.
Meanwhile, a quarter of parents say that grandparents are also paying towards their children’s education. The average yearly contribution is £4,703, up from £2,455 in 2013.
According to the AIC, university is still parents’ greatest financial priority when it comes to helping their children. Nearly half (46%) prioritise university costs, above the 33% who say helping their children get on the property ladder is their highest priority and 10% who said car. Among students, the results were similar, with 46% citing university costs as their leading priority, followed by a first property (28%) and car (14%).
The research found that almost half (49%) of parents will use some of their cash savings to fund their child’s university education, while 16% plan to use all or most of their cash savings. A much smaller percentage (16%) have used investment trusts, shares (15%) and funds (10%).
The AIC said the risk of losing money, not having enough money and a lack of understanding around how to invest in the stock market had prompted parents to use cash to save for children rather than the stock market. Despite this, 52% think that an investment in the stock market would deliver better returns than cash over a ten year period.
Nick Britton, research director at the Association of Investment Companies, said: “Millions of parents make big financial sacrifices to send their children to university, and our research shows that many grandparents are digging deep too. So it’s worrying that more parents aren’t using the power of the stock market to help boost their savings over the long term.
“Of course, not everyone can afford to put money aside, but those who can usually use cash savings accounts rather than the stock market. That’s despite the fact that most parents recognise an investment in the stock market will do better than cash over a typical ten-year period.”
Britton said an investment of £50 a month in the average investment trust over the past 18 years would have left investors with £30,668, comfortably covering what the typical parent contributes over three years of university.
