Supporting your children in their ambitions for the future requires careful planning, says Charlie Nunn, global head of wealth management, HSBC.

Being a parent is a joy, a privilege and a huge responsibility, especially when it comes to education. I’m a father of four. Although there are many years to go until my children apply to university, I’m already thinking ahead. What type of higher education will suit my children? Will they get the grades to study where they want? And, crucially, how will we pay for it?

I was part of a generation who were lucky enough to get tuition covered by the UK government. I even got a university grant. But the world has changed. In many places, students and parents now pay a significant proportion of costs of higher education themselves. In the UK, tuition fees can be up to £9,000 each year, on top of which you have to pay for accommodation, food and travel.

Studying overseas, which has more than doubled in popularity since I was a student (UNESCO figures on international students), can be more expensive still. The average cost of a year of study in the US, the most popular destination for overseas students, is more than $35,000 (The Value of Education Springboard for Success 2014) if you include tuition and living costs. Degrees in the US often last four years. That gives a rough total of $140,000. Multiply it for several children and you can see why many parents try to think ahead.

A new HSBC report, Value of Education: Learning for Life, shows that parents in Asia, Europe, the Middle East and the Americas all share a firm belief in the importance of a good education. It can open up opportunities, help young people make new friends and improve their job prospects. Perhaps this is why parents in both developed and emerging economies are prepared to make big sacrifices to help their child get a decent education. Some 95 per cent of parents with a child at university make or plan to make a direct financial contribution to tuition, living costs, or both.

While parents agree that education is hugely important, their expectations differ in some important respects. Parents in emerging economies including India, the UAE and Mexico place a strong emphasis on continued formal education. More than two thirds in these countries think a postgraduate degree is essential for their child to achieve important goals in life. They are also more likely to have a clear idea of what they think their children should do after graduation. Vocational careers such as medicine, which tend to lead to relatively stable and well-paid jobs, are popular.

It pays to make a savings plan for your children’s education

In developed economies, parents tend to take a more hands-off approach. They are less likely to have a career in mind for their children and are more relaxed about formal education. For instance, fewer than one in five parents in Australia and the UK think a postgraduate qualification is a must-have. And while more than half of parents in Asia have paid for extra tutoring to give their children a boost, less than a quarter in Canada, the UK, Australia and France have done so.

The most sobering finding from our research, however, is that people are poor at preparing for the future. The majority think they will be able to save and put enough money aside to pay for children’s education. In practice, fully 30 per cent of parents with children in university rely, or expect to rely at some point, wholly on day-to-day income, rather than savings, to provide support. There is a gap between people’s expectations and reality. We are worse at planning than we would like to think.

Around a quarter of parents with children at university say they have incurred debt, or expect to, in order to support them. If you borrow money, you have to repay the interest as well as the capital, so it is more expensive to borrow than it is to save. Taking on an extra financial burden is unfortunate, but perhaps the worst consequence of poor planning would be if talented young people were unable to go to university at all. That would be bad news for them and for society as a whole.

The advice to parents is clear. It pays to make a savings plan for your children’s education and stick to it. A realistic idea of how much you are likely to need can help you make suitable provision for your children, realise your ambitions for the future and support them to achieve theirs. All you have to do is watch with pride as they acquire skills and confidence to make their way in the world.

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