Saving for children’s education can feel like a significant challenge for many parents. However, with careful planning, these costs can become more manageable over time, helping to reduce financial pressure later in life.
Most parents understand the importance of education in helping their children build a successful future. Many families are now recognising that education costs are rising and that early financial planning is becoming more important than ever.
Whether your child is starting school or is still very young, putting a structured savings or investment plan in place can help you prepare for future secondary school and college expenses with greater confidence.
Is Saving in Cash Enough?
Many parents begin by setting aside money in a bank account. While this offers security and easy access, bank accounts may not always keep pace with inflation over the long term.
If your child is several years away from third-level education, investing some of your savings may offer greater long-term growth potential. While investments can fluctuate in value, when managed appropriately, they can help build a larger education fund over the long term.
The Cost of Secondary and Third-Level Education
Although primary and much of secondary education in Ireland is state-funded, parents still face a range of additional costs, including:
- School books and materials
- Laptops or tablets
- Uniforms and extracurricular activities
- Transport and school trips
Third-level education often brings even higher expenses.
According to TU Dublin’s Cost of Living Guide, for the 2024/25 academic year, students living away from home may face monthly costs ranging from €1,264 to over €2,000, with accommodation usually being the largest expense. Students living at home may still incur costs of around €775 per month.
In addition, the student contribution charge can be up to €3,000 annually, depending on eligibility for grants or supports.
These figures highlight why building an education savings fund early can be so valuable.
(Source: TU Dublin Cost of Living Guide – 2024/25 academic year)
How to Start Saving for Education
Open a Dedicated Education Fund
Setting up a separate savings or investment account can help keep education funds organised and reduce the temptation to use the money for other expenses.
Making regular contributions, even small amounts, can grow significantly over time.
Using the €3,000 Small Gift Exemption
One tax-efficient way to build an education fund is through Ireland’s Small Gift Exemption.
This allows individuals to gift up to €3,000 per year to a child without triggering Capital Acquisitions Tax (CAT).
For example:
- Both parents can gift €3,000 each per year
- Grandparents and other relatives can also contribute
- Over time, these gifts can significantly increase education savings.
Why Starting Early Makes a Difference
Starting early gives your savings or investments more time to grow. It also allows families to spread education costs over time, rather than incurring large expenses later. Even small monthly savings can make a meaningful difference when combined with long-term planning.
Speak With a Financial Advisor
Every family’s financial situation is different. A personalised financial plan can help you balance education savings with other important goals such as mortgage planning, protection cover, and retirement planning.
A financial advisor can help you create a clear, structured plan for your child’s education.
At Donnelly Financial Planning, we work with both new and existing clients to develop tailored education savings and investment strategies.
Stephen Donnelly (QFA, RPA) at Donnelly Financial Planning can provide personalised advice to help you balance education savings with other important financial priorities.
FAQ: Frequently Asked Questions
1. How much should I be saving for my child’s education?
The amount will depend on factors such as your child’s age, whether they are likely to live at home or away during college, and your overall financial situation. A financial advisor can help you estimate future costs and set a realistic savings target.
2. Is it better to save in the bank or invest for education costs?
Bank accounts offer security, while investments may provide greater long-term growth potential. Many families use a combination of both, adjusting the balance as education costs draw closer.
3. Can grandparents contribute to education savings?
Yes. Grandparents and other relatives can each gift up to €3,000 per year under the Small Gift Exemption without triggering CAT, making this a tax-efficient way for family members to help.
4. What happens if my child doesn’t go to college?
Education savings can often be redirected to other purposes, such as a house deposit or future financial support. The options will depend on how the funds were saved or invested, so advice is recommended.
5. When should I start planning for education costs?
The earlier you start, the more flexibility and growth potential you have. Even small contributions made early can significantly reduce financial pressure later.
Important Information
This article is provided for general information purposes only and does not constitute financial, investment, tax, or legal advice. The content is based on our understanding of current Irish legislation and Revenue practice, which may change over time.
Investments involve risk. The value of investments may go down as well as up, and you may not get back the full amount you invest. Past performance is not a reliable guide to future performance. The suitability of any savings or investment product will depend on your individual financial circumstances, needs, and attitude to risk.
Tax treatment depends on individual circumstances and may change in the future.
Donnelly Financial Planning acts as an insurance and investment broker and provides advice based on a fair, personal market analysis. Donnelly Financial Planning is regulated by the Central Bank of Ireland.
For tailored advice on education savings and investment plans, Contact Stephen Donnelly, QFA, RPA
Disclaimer
*Past performance is not a reliable guide to future performance.
*The value of your investment may go down as well as up.
*Your investment fund may be affected by changes in currency exchange rates.
*If you invest, you may lose some or all of the money you invest.
