During the boom, abundant employment, cheap money and free third-level education meant few of us bothered to save for our children’s futures. However, with leaner times upon us and the prospect of third-level fees likely to be introduced next year, many parents in their 50s may be forced to divert funds for pension plans into their children’s education.

Costs
Current estimates suggest that it costs around €42,000 to support an adult child in third-level education for four years, excluding fees, which are set to be between €5,000 and €7,000 a year.

Savings
“At present, the over-55s are not saving in substantial numbers for education,” says Una McNamara of Postbank. “In our July Postbank Savings Index, only 1 per cent cited education as the main driver for their savings, with another 4 per cent offering it as a secondary reason,” she explains. McNamara adds that this is well below the 40-55 age group.

“The key drivers at the moment for savings in the over-55s group are retirement and the ability to deal with the unexpected.”

To make matters worse, many parents spent any spare cash in their budget on fee-paying secondary schools during the boom, presuming that university education would remain free. Numbers attending fee-paying schools rose by 13 per cent between 2000 and 2007.

Research
A recent survey, which was carried out in the UK by the Association of Investment Companies, revealed that 10 per cent of parents plan to delay early retirement to help fund their children’s third-level education. Savings experts suggest that it’s a similar story here.

According to Bank of Ireland (BOI), research carried out in conjunction with schooldays.ie shows that 89 per cent of parents believe they will need to borrow to fund their child’s third-level education if the Government reintroduces fees in September 2010. On top of this, 78 per cent will suffer financially when Child Benefit for over-18s in full-time education ends next year. In addition, 54 per cent have no savings plan to provide for third-level education.

Pension fears
McNamara says that parents over the age of 50 are worrying about the future of their families, which is why they are seeing an uptake in life assurance.

While the BOI/Schooldays.ie research reveals that parents are dreading the burden of third-level fees, it warns against using pension plan savings to bridge the gap.
“As in any time of financial difficulties, parents may consider diverting savings from pension funds to cover education costs. However, we would recommend that they speak to a financial adviser before making this decision,” says Sharon McDonnell, group consumer communications manager with Bank of Ireland.

“Parents need to ensure they are making an informed decision and that they understand the future consequences of funding their retirement, which is a long-term need,” she explains, adding that BOI offers a free advisory service in all its branches.

All of the banks offer education savings products and they suggest saving early and regularly for education.

However, the more recent rumour that a student loan system may be on the cards offers some hope for cash-stretched parents.