Big milestones in our lives usually coincide with big personal finance decisions, or at least give us a nasty reminder that we should have been considering our financial futures when it would have made a difference to the here and now.

Hindsight, as they say, is a wonderful thing. I had my first child two weeks after the collapse of investment bank Lehman Brothers.  

That recession was tough for many people including my family and when that envelope dropped through the door explain that the government had stuck £250 into a Child Trust Fund and inviting us to add to the pot, I’m afraid I just threw the letter away.

Fast forward almost 18 years and I’m wishing I’d given that a bit more thought. I didn’t work in financial services at the time and money was tight.

But we still spent a small fortune on plastic tat that we ended up donating to the local play school once the kids grew out of it.

We could have spent a bit less on ‘stuff’ for birthdays and Christmases or even set up a small monthly direct debit that we wouldn’t really have missed.

Just £25 a month or £100 twice a year in place of stocking fillers or a birthday treat could have turned into a bijou but incredibly useful pot of cash that would have assisted us with our daughter’s next chapter.

PARENTS FACE HUGE UNIVERSITY COSTS

Because it’s just beginning to dawn on me how expensive that next chapter is likely to be. When I went to university tuition was free. My parents helped cover my meagre accommodation and living costs and I took out a very small student loan and I had a part time job which pretty much covered drinking expenses.

Fast forward a few decades and my daughter (well both my daughters but I’m trying to ignore that at the moment) want the university experience too. It had penetrated my brain that they would have to take out a loan to cover tuition fees (you can hear more about those expenses on our next Money Matters podcast) but I hadn’t considered how much we as parents would have to fund.

Students from households with a combined income of just over £70,000 a year can only access the minimum level of maintenance loan, for the 2024/25 academic year that equates to just £4,767 if you are living away from home, slightly more if you study in London. (Students from households with a lower combined income are eligible for bigger loans).

Whilst accommodation costs vary widely a quick look on university websites, I’m fast realising that loan is unlikely to fully cover those costs in most of the locations my daughter is considering and even if there were a few pennies left over, they won’t come close to covering basic sustenance.

And of course, any maintenance loans are wrapped up with tuition fees – a huge weight of debt I was spared.

WHY DON’T WE HAVE US-STYLE COLLEGE FUNDS

While there would have been no guarantees that my daughter wouldn’t have blown a chunky Child Trust Fund or nicely padded JISA on a wild summer of post-exam debauchery, I’d like to think she would have been sensible enough to use it in place of running up more debt.

That quirk, the fact that 18-year-olds get control of their pot of cash, is something that has put off some parents from investing for their kids but as few of us ever max out our own ISA allowances, that could have been a smart compromise. 

I have found myself wondering why college funds haven’t become a thing in the UK. I can’t count the number of Hollywood movies or streaming dramas that talk about the family with 2.4 kids putting cash away in college funds.

Perhaps it’s because American’s have always had to pay for further education, whilst here in the UK it’s not something parents had to contend with and in fact it wasn’t until 2012 that the current £9,250 a year tuition fee rate came into effect.

Before that, taking out a loan to cover the modest fees and certainly board and lodging seemed manageable, whilst today those additional maintenance loans just swell an already eyewatering debt.

So, I can be forgiven for not having a crystal ball back in 2006, but the situation is different for those of you with younger children, especially if you find yourself able to access free childcare hours, eligible for child benefit where you weren’t before, or your kids start primary school and you only have to fork out for wrap-around care.

Don’t just have those dreamy conversations about the fact your five year old is clearly destined to become a financial whiz because they can already count the number of skittles they delicately drop into their open mouths, consider the long slog it will take for them to get that economics degree, and the cash needed along the way – and open that Junior ISA, or stick a few extra pennies in your own ISAs.

Danni Hewson is a founding ambassador of AJ Bell’s Money Matters campaign aimed at helping women become more confident with their financial lives.

DISCLAIMER: AJ Bell, referenced in this article, owns Shares magazine. The author (Danni Hewson) and editor (Tom Sieber) own shares in AJ Bell.

For more information about AJ Bell’s Money Matters campaign which is aimed at helping more women feel good investing please sign up for the newsletter here. 

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