Children's trust Planning

Becoming a parent will likely be the best (and perhaps most difficult) part of anyone’s life journey. It will also bring about huge adjustment – there will be many new things to consider, from whether your home will be big enough to accommodate the newest member(s), to what you will need to have in place for them before they arrive. From a financial planning perspective this will also lead to an unknown when it comes to your monthly costs and saving capacity.

However, for most parents when it comes to longer term financial planning for their children, the biggest question marks surround the cost of education and setting their children up for entry into the adult world.Options normally abound when it comes to education, from state or private secondary education to college, university or direct entry into the working world. 

The reality is that planning must cater for many unknowns. Where will you be living when your children grow up, will they want to go to a local school and university or would they prefer to move further afield etc?For many people, this longer-term planning could also include things such as buying first cars or providing deposits for their first property.As with most people’s financial planning the difficulty here is that everyone’s situation is different. The benefit of speaking to your financial advisor about this area of planning is that they can help walk you through the options, give you guidelines on present value costs and future adjust these costs, including inflation, to allow you to build a target for the future.

We will consider a simple example below. However, we must again remember that options abound and everyone’s situation will vary. University tuition fees, for example, can be hugely different around the world and even within countries themselves. In Europe you can expect to pay anywhere from zero to EUR 40,000+ per annum for higher education. In Australia and the US, in some cases, you could even double this figure.

Building The Plan

Assumed annual tuition fee in Europe (today):EUR 20,000 per annum
Provision for living expenses @ EUR 1,500 per month:EUR 18,000 per annum
Total annual cost:EUR 38,000 per annum
Five year study course:EUR 190,000
Two children (aged 2 and 4):EUR 380,000
Inflation adjusted target (to age 18):EUR 592,028

Saving To Reach The Goal

Monthly saving required over 15 years (the average between 14 and 16 years to have each child reach 18 years old) and assuming investment growth of

Assumed growth on savingsSaving requiredTotal money saved
0% per annum:EUR 3,289 per monthEUR 592,020
4% per annum:EUR 2,369 per monthEUR 426,420
7% per annum:EUR 1,835 per monthEUR 330,300

Filing your tax return

Although we never know exactly where the future may lead, it is better to plan for the worst (most expensive objectives) and have money left over, than to hope for the best and not have the funds available to provide your children with what you would most like.

Please contact us today for an exploratory discussion to find out how we can help with all of your planning needs.

The Cost Of Delay

If you were to wait for another five years before starting to save, but wanted to reach the same goal then the savings required would be

Assumed growth on savingsSaving requiredTotal money saved
0% per annum:EUR 4,933 per monthEUR 591,960
4% per annum:EUR 3,951 per monthEUR 474,120
7% per annum:EUR 3,337 per monthEUR 400,440