If you have a child or grandchild heading off to university this September, you might be filled with a mixture of conflicting emotions – pride, worry, excitement, and sadness, all rolled into one.

Student life is full of “firsts” including, for many, living independently and managing their own money for the first time. Learning to budget, save, and spend responsibly can take time and may come with some trial and error.

What’s more, having lived through two years of the cost of living crisis, students are sadly facing higher living expenses. UK Parliament reports that in 2023, the average student’s monthly outgoings rose by 17%, from £924 in 2022 to £1,078. Plus, the BBC says that 1.5 million people are now in more than £50,000 of student debt, putting pressure on their earnings after they graduate.

As a parent or grandparent, you may have offered the students in your family some financial support. This could come in the form of paying tuition fees, helping with accommodation costs, or giving them a monthly allowance to supplement the maintenance loan they might receive from the government.

If so, keep reading to discover two aspects of offering financial help to a student that you might want to consider.

1. Decide where your funds might be most helpfully placed, and over what time frame

It’s likely that you have a set amount you have decided to contribute towards your child or grandchild’s higher education.

So, one of the most crucial decisions to make before parting ways with this money is to choose where the funds are best placed.

Paying tuition fees upfront

You might have thought about paying some or all of your child’s tuition fees in order to prevent them from leaving university with a large amount of debt. As of the 2024/25 academic year, most English and Welsh universities charge £9,250 a year.

While this might sound like a great idea, remember that many students won’t finish paying off their student debt in their lifetime, so paying these fees upfront may not be the most cost-effective course of action.

Plan 5 students (those starting an undergraduate degree after August 2023) won’t need to start repaying their student loans until they earn £25,000 a year or more, and the debt is expunged after 40 years.

What’s more, the amount your child would repay each month after they begin earning enough is usually very small – as little as £8 a month – and will rise in line with their income. So, while the total amount of debt they hold is large, your child is unlikely to be overwhelmed by the financial burden of paying back tuition loans.

Helping with accommodation and living costs

Aside from tuition fees, accommodation is likely to be the most expensive aspect of a student’s life. MoneySuperMarket says that purpose-built student accommodation costs an average of £7,374 a year. Private rents average at £550 a month or £6,600 a year, Save the Student reports. These vary widely between locations, with London being the most expensive place to live and study.

In the 2024/25 financial year, the maximum maintenance loan most students can receive when studying outside of London is £10,227. This means that your child or grandchild may spend more than two-thirds of this money on accommodation. For London-based students, the maximum maintenance loan is £13,348, but Save the Student says these students spend around £900 a month (equal to approximately £10,800 a year) on rent.

So, it could be extremely helpful to offer your child some ongoing support with living costs while they’re at university. This could be by acting as a guarantor on any accommodation contracts they sign, providing financial help on a monthly basis, or providing a lump sum at the start of the year. Alternatively, you could supplement their budget for non-accommodation spending including food, activities, travel, and clothing.

2. Talk to a financial planner before you offer funds to a student

From a student’s perspective, your financial assistance will likely be gratefully received. But there is another point of view you might wish to consider first: how offering this money might affect your own future plans.

For example, if you gave £7,000 a year for accommodation costs and your child or grandchild is studying for three years, your contribution would be £21,000 – no small sum.

In order to pay for this expense, you might consider:

• Dipping into your pension pot if you are able to
• Liquidating a portion of your investment portfolio
• Using up your cash savings.

While there is no harm in wanting to help your child or grandchild through higher education, using up too much of your savings or investments could hurt your financial viability later in life. This may be especially true if you have set-in-stone goals, such as hoping to retire at a specific time.

That’s where working with a financial planner may come in handy. I can help you establish how much you can comfortably afford to pay towards your child’s higher education, looking at all the variables to ensure your financial plan is still on track to meet your goals.

I can also help you decide how best to contribute towards your child’s costs, including whether to provide a lump sum or ongoing payments, the implications of being a guarantor, and so much more.

Get in touch

If you want to support your child or grandchild at university but are unsure where to begin, or have any other questions about financial planning, get in touch.

Email me at a.douglass@grosvenorconsultancy.co.uk or call my office on 01793 766 123. Alternatively, call my mobile on 07525 177 046.

While I offer high standards of service and will work with you to ensure any plan is right for you, I’m also a busy mum, so work Mondays and Tuesdays only.

Please note

This article is for general information only and does not constitute advice. The information is aimed at retail clients only.

All contents are based on our understanding of HMRC legislation, which is subject to change.

A pension is a long-term investment not normally accessible until 55 (57 from April 2028). The fund value may fluctuate and can go down, which would have an impact on the level of pension benefits available. Past performance is not a reliable indicator of future performance.