This year, university tuition fees will be kicked up another 3.1% to £9,535, meaning heftier loans for students footing the bill. In the circumstances both students and parents may be inclined to do some forward thinking on how to save for their studies most effectively.

The increased charges associated with university tuition represent a significant departure from how older generations were able to handle the costs of higher education. The parents of students now heading off to university might have paid closer to £1,000 per year, which was the cost in 2000.

While inflation has made most things more expensive in the past 25 years, goods costing £1,000 in 2000 would cost just under £2,000 today. That’s a fair way off from the £9,535 students are expected to pay today, not factoring in the cost of housing, food, and (let’s be honest) a few trips to the pub.

A MORE FORMIDABLE OBSTACLE

Because tuition fees used to be relatively manageable, it was common for students to repay them as they began their careers. But now, the mounting fees present a much more formidable obstacle. Now, more parents are pitching in.

According to a survey by the Association of Investment Companies, run by Opinium, over 70% of parents are helping out with their children through university, with an average contribution of £8,723 per year.

Ultimately, it’s up to you to decide if you’d like to help your child out while they are at university. But if you do, it may be better to get started saving sooner rather than later. About half of parents are using some or all of their savings to help their children through university, and 64% are using cash to save for their children.

However, a bit of savvy investing instead could make savings go a lot further, especially if you’re able to start early. One of the easiest ways to save for children is through a Junior ISA. As a bonus, grandparents or family friends can also contribute to this account, which can put a boost on the savings.

HOW MUCH TO SET ASIDE?

If parents invested £50 per month for their child from when they were born until their 18th birthday, and the investment grew by an average 8% each year, they could have £21,536 in the account as they were heading off to university. Equally, if a parent maxed out the £9,000 limit for yearly contributions in a Junior ISA, this pot could turn into nearly £313,000.

Realistically, putting £9,000 aside each year on top of childcare costs is not possible for most parents. In addition, if you have multiple children, this can become quite a lot to save. But thinking ahead can save a lot of money in the long run. For a parent that is able to put away that £50 per month discussed above, at a 7% return rate, over half the money that’s been added to the account would be a result of compound interest, instead of out of your pocket.

Assuming tuition prices stay put; to cover three years, you would need an end pot of a little under £30,000, not factoring in housing and food costs. If your investment returned 7%, this would mean you could reach that pot in 18 years with investments of around £70 per month.

BREAKING DOWN THE JUNIOR ISA

if you choose to invest for your child through a Junior ISA, there’s a few rules that are helpful to keep in mind. While a typical stocks and shares ISA has a cap of £20,000 per year in contributions, a junior ISA has a cap of £9,000. Until the child turns 18, anyone can contribute to their Junior ISA. But once the child turns 18, it’s automatically converted into a regular ISA. For example, a Junior ISA invested in stocks and shares would just become a Stocks and Shares ISA.

Notably, once the Junior ISA holder turns 18, they also have access to the money just like they would with a regular ISA. So, it does require some degree of trust in your child. Once the holder is 16, they can also start to make investment decisions, even though they can’t withdraw the money yet.

If you want to ensure that funds you save will go to your child’s tuition rather than other expenditures, you can also choose to save the money within your own ISA. This will eat into your ISA allowance however, and it will also mean that you can withdraw it. So, if you think you may be tempted to use the money for other reasons, a Junior ISA could be the more suitable option.

Unless you’ve saved money in a Lifetime ISA account, you have the ability to spend the money on what you please. This means that if your child decides to learn a trade, or go straight to work instead of university, they can also put the money in their Junior ISA towards these efforts instead.

WHEN IS IT TOO LATE?

If there’s just a few years before your child heads off to university, you may not be as comfortable taking risks with the savings. When there’s 18 years ahead of you, there’s plenty of time for market volatility to even out. But when this is closer to two or three years, you may want to have more security in what you’ve saved.

There are still investments that could be helpful at this point, such as bonds or money market funds, to help those returns possibly boost a bit above the cash savings rate. Ultimately, any money that a child doesn’t need to loan can be a big help for the future.

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