As the new academic year begins, parents and grandparents are being urged to start early when planning how to finance their children’s or grandchildren’s university education. With tuition fees and living expenses continuing to rise, experts emphasize the importance of accumulating sufficient savings well in advance.

Dan Coatsworth, head of markets at investment firm AJ Bell, noted that over half of parents with children under 18 are currently saving or investing money to help cover the costs of higher education. Among these families, the average monthly contribution is approximately £125. The maximum tuition fee for a standard full-time course in England now stands at £9,790 per year, which means the total tuition for a typical three-year degree can approach £29,400, excluding living costs. Government data projects that the average student loan balance for those beginning repayments in the 2025/26 academic year will be around £47,730.

Coatsworth highlighted that the average savings pot for university expenses is currently about £7,500. While cash savings remain the most common method, investment in equities can potentially yield higher returns when held over longer periods, such as five years or more. AJ Bell’s analysis shows that investing £50 per month in a global equity tracker like the Vanguard FTSE All World Exchange Traded Fund (ETF) starting at birth could grow to nearly £22,000 after 18 years. In comparison, saving the same amount in cash would accumulate to roughly £12,500.

Parents also have the option of using Junior Individual Savings Accounts (ISAs) to save tax-free up to £9,000 a year in shares or cash. These accounts are legally owned by the child from age 18, and the funds cannot be accessed by parents.

However, retirement experts at Standard Life caution against funding education costs by withdrawing from pension plans. Their analysis indicates that a 55-year-old who took £90,000 from their pension to cover three years of tuition might have £119,000 less in retirement savings by age 68 due to lost investment growth. Neil Jones, a tax and estate planning specialist at Standard Life, stressed that while supporting a child through university can be rewarding, parents should carefully consider the long-term impact such financial decisions could have on their own future security.

The advice underscores a balancing act for families: preparing adequately for education expenses without jeopardizing the financial stability of older generations. Early and diversified saving remains a key strategy to meeting these rising costs.