One of the most compelling reasons for investing through a Junior ISA is to help provide your offspring with the necessary funds to leave university without the burden of onerous debts.

If you invested the whole allowance of £9,000 every year from birth until your child reached 18 they would inherit a pot worth £229,000 based on an annual return of 4.5% and with charges of 0.75% factored in. Best of all, because it is in a Junior ISA, your pot will have grown without incurring tax.

But how much exactly would you need to cover university tuition fees, accommodation and food and other costs, and what would it take to reach these goals?

In this article we’ll examine three different scenarios: one where you are simply trying to cover the cost of tuition, another where the aim is to cover tuition and rent and a final scenario where all the costs of living and studying at university are covered.

Any of these would be a laudable goal and you could ramp up or be more pragmatic with your plan depending on your circumstances. For example, you might start out with the aim of covering tuition fees only but find you are able to put away a bit more or take some extra risk in order to meet a more ambitious target.

A FRAMEWORK TO PLAN AROUND

It is important to say the totals included in this article are just educated guesses. They provide a framework to plan around but the more you are able to put away and the earlier you can start, the better the chance you have of ensuring your kid or kids can graduate without being weighed down by significant borrowings.

Or, if they decide university is not for them and they end up doing an apprenticeship or going straight into the world of work at age 18, they will have a sizeable sum to help them get on the property ladder or achieve some other goal.

It’s worth remembering that it will genuinely be up to your young person how they spend their cash once they reach 18 and their Junior ISA automatically converts to an adult ISA.

Another thing to note with Junior ISAs is others can put money in too, so the whole burden doesn’t necessarily have to fall on you if you’re lucky enough to have friends and family who are willing and able to contribute.

If your kid has more toys than they know what to do with then a contribution to the university education fund might make for a more meaningful present suggestion (if unpopular with your little one in the short term).

SCENARIO 1: 

Covering tuition fees only. Total bill £42,742

Tuition fees vary depending on which region of the UK you live in. In England, annual fees are capped at £9,250 for UK and Irish students until 2025.

Scottish students can study for free in their home country, but outsiders must pay £9,250. In Wales, yearly tuition fees are currently £9,000 per year but are set to rise to £9,250 from September 2024. If you are from Northern Ireland and your children are studying there, tuition fees are £4,750 per year.

You might need to set aside more if a course goes on for longer: for example, medicine and veterinary courses run for between five and six years.

Tuition fees have been fixed at £9,250 since 2017 but it would be naïve to think this situation will persist indefinitely, particularly as many universities are finding it difficult to balance the books.

Applying a 4% inflation rate to tuition fees from 2025 onward, the point to which the current UK Government has frozen fees, means by 2034 the annual cost would have increased to £13,692.

Someone looking to raise enough to cover a three-year course in a decade’s time would therefore need to achieve a sum of £42,742, with 4% increases for years two and three factored in.

Assuming a 4.5% return and investment charges of 0.75%, from the age of eight you would need to put £295 per month into a Junior ISA. However, if you were prepared to take on a bit more risk to achieve a 7.5% return (which is not drastically out of line with the average return from financial markets over the long term) this figure would be reduced to £252 per month.

Let’s assume you started a bit earlier than that – when the child was three, for example. Based on a 4.5% return and fees of 0.75% you would need to set aside £178 per month and if we bump the return up to 7.5% the monthly total would be £140.

SCENARIO 2: 

Meeting tuition and accommodation costs. Total bill £82,631

The best measure of student accommodation costs in the UK is provided by a three-yearly survey by Unipol and the National Union of Students. The latest figures we have are for 2021, when the average cost for weekly rent in the UK in purpose-built student accommodation for 2021-2022 was £166. Private accommodation averaged £155 a week for an ensuite room and £228 for a studio. In London, the average was £212 per week for university accommodation and £259 for privately-owned property.

On an annual basis, the average cost of student accommodation was £7,374 but given inflation came in at 8.2% across 2022 and 2023 in the UK we’re going to be prudent and apply that rate for those two years. Now inflation has moderated let’s apply the same 4% rate to accommodation costs as we did to tuition fees – that puts our starting point in 2024 at £8,978. For someone going to university in 10 years’ time the total outlay to cover accommodation over three years would be £39,889.

If we put that alongside the estimated cost of tuition earlier then we arrive at a total of £82,631. To achieve that with an investment return of 4.5% (again with charges of 0.75%), you would need to allocate £570 per month and at 7.5% £488 over a decade.

SCENARIO 3:

Everything covered. Total bill £107,999

Working out exactly what someone might need to cover their costs at university outside of accommodation and tuition fees is not an exact science.

Shares has had a stab by employing personal finance portal NimbleFins’ analysis of ONS (Office for National Statistics) data.

This provides a picture of the average spend on items like food, insurance, toiletries, utilities, socialising and going out, entertainment subscriptions, broadband and clothes. Some of these figures are for households rather than individuals and some costs might be covered by the student accommodation provider. We’ve also assumed these costs will be borne throughout the year whereas students might look to make savings by heading back to mum and dad during the holidays, but by stretching the target out a bit we should allow for some contingency to cover unexpected or one-off expenses.

Again, if we assume a 4% annual increase in these costs going forward, then over three years starting in 2034, they will add up to £25,368. The overall bill, adding in tuition fees and accommodation costs would therefore be £107,999. At a return of 4.5% and with 0.75% fees factored in, you would need to put in close to the current maximum allowance for Junior ISAs – £745 per month or £8,940 per year for a decade. A return of 7.5% would reduce this to £638 per month.

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